The Disrupter's Retreat

The Red Light

Mara: January 2018. Miles Paschini watches a business he helped build go dark. It was a debit card linked to crypto, run by Wave Crest, where he'd been group president back in 2014. What ended it was one letter. A cease-and-desist from Visa. Paschini tells it himself on the podcast Around the Coin: that business 'died in January of 2018 by a cease and desist letter from Visa.'

Eli: So, a prepaid card that spends crypto converted into ordinary money.

Mara: Right, and every swipe rode on Visa's network. So Visa could switch the whole thing off. That's the backdrop for the question a listener sent in: could traditional banks eventually become irrelevant? Today's angle is the disrupter's retreat, why trying to bypass banks forces tech pioneers to become them.

Eli: A whole card business, ended by the network it ran on. Whether new money rails, the payment networks that move money, can ever run without the old ones underneath is the question that letter leaves.

The Unbundled Challengers

Mara: That letter landed on someone who'd spent nearly twenty years in prepaid. Paschini founded a company in 1999 that built mobile PIN top-ups, the way phone users bought more airtime. He sold it to Blackhawk Network in 2006. By 2014, the pitch had grown. He said a feature-rich payroll card from an employer is 'going to operate no differently than a bank account.'

Eli: Except the company isn't a bank.

Mara: And he had people in mind. He said some are underserved by banks, some don't want to work with banks, and some just don't want to go to a branch anymore. For them, the card was meant to be the account.

Eli: The newest version of that idea is the payment stablecoin. It's a crypto token pegged to a currency like the dollar, built to stay worth one dollar. A University of Chicago law review piece says stablecoins can move funds almost instantly between digital wallets, across borders too, for potentially low fees. That puts pressure on the payment services and transfer fees banks earn.

Mara: Paschini's payroll card logic, minus the card.

Eli: And it's not a side show anymore. JPMorgan says stablecoin volume more than quadrupled in under three years. By August 2025, it was about 970 billion dollars a month.

Mara: And a lot of the new money business runs through firms that aren't banks.

Eli: That's a point made by the side that sees banks as indispensable, people like Michelle Bowman and Chris Skinner. Fintechs mostly don't take deposits or lend themselves, so the same rules don't apply. Traditional banks say that lets fintechs move more nimbly into some businesses.

Mara: Lighter rules, lower costs. And, as Wave Crest found, a lighter footing.

Eli: But moving money isn't making it. That same law review piece names money creation as a core job of banks. Here's the mechanism. When a bank makes a loan, it doesn't pull cash out of a vault. It writes a new deposit into the borrower's account. That deposit didn't exist before, so the money supply just grew. That's fractional-reserve money creation: lending by typing up new electronic deposits. It makes money, not wealth. A payroll card or a stablecoin moves money around. A bank loan brings new money into being.

Mara: So Paschini's card could act like an account, Eli, but whether fast tokens can do without that power is still wide open.

The Sovereign Safety Net

Eli: That power comes with a built-in strain. Banks fund long, hard-to-sell loans and assets with short money, mostly deposits customers can pull any day. That's maturity transformation: borrowing for days, lending for years. The University of Chicago Business Law Review calls it 'a sort of financial alchemy.'

Mara: Alchemy that works until everyone wants their deposits back the same day.

Eli: Which is why banks sit inside what the industry calls the regulatory perimeter. Inside it: federal deposit insurance, access to Fedwire and ACH, the systems that move dollars between banks, central-bank liquidity when cash runs short, and the public confidence strict supervision brings. The price is heavy oversight. To those who see banks as indispensable, Dennis Khoo and Michelle Bowman among them, that perimeter is exactly what can't be safely copied.

Mara: In March 2023, that same day came for Silicon Valley Bank. Its long-term bonds had lost value as interest rates rose. They weren't in danger of default. The payments would still come. But depositors moved fast, and they moved together. Researchers J. Anthony Cookson, Corbin Fox, Javier Gil-Bazo, Juan Felipe Imbet and Christopher Schiller found that coordinated social-media activity by depositors contributed to the run and amplified its severity for other banks. On March 10, California regulators seized SVB. It didn't fail on bad assets. It failed on a run.

Eli: Short money left fast. The long bonds couldn't keep up.

Mara: Then the backstop kicked in. The FDIC and Federal Reserve boards voted to cover SVB and Signature Bank depositors above the 250,000-dollar insurance limit. Their stated worry was that otherwise, big depositors elsewhere would run too. And the Fed launched the Bank Term Funding Program: more collateralized lending for stressed banks. In effect, a wider discount window, the Fed's standing emergency loan desk for banks.

Eli: Paschini's card sat outside all that. One letter from Visa was enough.

Mara: And crypto had already run that test, a year before SVB.

Eli: In early May 2022, a stablecoin called TerraUSD crashed. Across decentralized finance, or DeFi, crypto lending and trading run by software with no bank in the middle, the total value locked up fell by almost 40 percent. Lending and staking protocols took the biggest hits. European Central Bank authors spelled out why there was no cushion: without banks and their access to a central bank's balance sheet, DeFi has no shock absorbers beyond private ones, like loans backed by extra collateral.

Mara: SVB's depositors had the Fed behind them. DeFi had only its own collateral.

Eli: Nobody knows yet whether a new money rail can ever get that kind of backstop from outside the banking system. And that gap sits right in the path of anyone building money rails without a bank.

Chartering the Frontier

Mara: Which brings us back to Paschini. The man whose card business died by one letter from Visa went on to run a bank. He's CEO of FV Bank, and he says 'The whole purpose was to build a bank that supported FinTech companies.' He jokes that if they started it today, 'we might call it BV bank like Blockchain ventures.' And in 2026 he put it plainly: 'I think first and foremost is that we're a bank. We're a licensed depository institution who have adopted these types of solutions.' A chartered bank, in other words, legally allowed to hold deposits.

Eli: The card that worked like a bank account, now an actual bank.

Mara: And the crypto came along, inside the walls. He says FV Bank has spent a couple of years 'using stablecoins as a settlement route between other financial institutions.' His example is money from Latin America headed for the U.S. Going from Argentine pesos to a stablecoin, he says, is 'much more efficient' than a traditional bank-driven foreign-exchange process.

Eli: The old yardstick: wires can take days, and stop after hours and holidays.

Mara: So the fast rail runs through a licensed, regulated bank, on the side of the line SVB stood on, not the side DeFi did. What that leaves the big incumbent banks, Eli, is the question of who keeps the customer.

The Balance-Sheet Utility

Eli: And Paschini has company. Sixteen federal bank charter applications were filed in 2025, more than in the three years before combined. Some of those knocking are crypto firms. Circle, Ripple and Paxos have all applied for U.S. charters, and Deloitte reads that as banking and digital assets converging.

Mara: Firms that grew up outside the perimeter, now asking to come in.

Eli: And the rules are shifting under them. In July 2025, the GENIUS Act set a U.S. framework for payment stablecoins, and Deloitte says it opens the door for traditional banks too. Paschini points to that Act, and to what he calls 'the battle of the banks and the digital asset native folks' over another bill, the Clarity Act, a fight he described as still going on.

Mara: That fight is really over what a bank is for. On the side that sees banks staying indispensable, Paschini's side too, Dennis Khoo puts it this way: 'There's a difference between payments, getting a loan, and being a bank.' And, he says, 'Balance sheet management will always be there.'

Eli: Dan Schulman, Brett King and Jamie Dimon see banks pushed aside instead, Mara.

Mara: On that reading, the front door moves. Embedded finance means banking built into other software, like a car-buying app offering financing on the spot. Industry forecasts put about 70 percent of financial interactions through channels like that by 2040, instead of a direct bank relationship. And the Bank for International Settlements sketched where that can lead: the 'relegated bank,' with platforms owning the customer and banks left doing commoditized work like risk management, on squeezed margins.

Eli: Banks as plumbing. Still needed, just out of sight and squeezed.

Mara: Plumbing that still does the one job no app in this story does. Bank lending still makes new money.

Eli: So traditional banks aren't headed for irrelevance. Creating money through lending, and the government safety net behind deposits, still sit with them. What they can lose is the customer, if the front door moves to platforms, leaving them as back-end balance sheets. The evidence suggests that trying to bypass banks keeps pulling tech firms back into regulated banking, rather than making banks obsolete.

Mara: In 2018, one letter from Visa ended Paschini's card. By 2026, he was running a licensed bank.

Eli: The signal to watch is the Federal Reserve: whether stablecoin issuers that aren't banks ever get master accounts, a direct account at the Fed, with interest on their reserves, or whether that stays limited to depository institutions.

Mara: For more on settlement, look into payment stablecoins.

Eli: Follow Business with us as traditional banks confront digital alternatives.

Mara: That's all for this one. I'm Mara.

Eli: And I'm Eli. Thanks for listening to Angle. Until next time.