Crypto Neobanks vs Traditional Banks for Web3 and Fintech Businesses

As Web3 companies scale across borders and blend fiat with on-chain activity, banking access has become a strategic constraint rather than a back-office concern. Regulatory uncertainty in Europe, de-risking by correspondent banks, and legacy compliance frameworks have pushed many crypto firms away from traditional institutions and toward crypto-native alternatives.

This article breaks down why that shift has occurred, where traditional banks still matter, and how businesses can choose or combine banking partners to support growth without compromising operational resilience.

Crypto neobanks are digital-only banks for blockchain- and digital asset-native businesses, built on branchless, API-enabled core banking systems. Most are EMI-licensed, with some operating under full banking charters. Unlike digital banks—which are typically spin-offs of legacy institutions—crypto neobanks are natively designed for Web3 clients.

Web3 companies use crypto neobanks because traditional banks systematically refuse to bank crypto businesses. NextPay CEO Sofian identified this opportunity in 2017/18, when fellow entrepreneurs across a wide range of crypto projects were consistently being denied access to banking services.

Crypto neobanks offer standard banking features that traditional banks often deny to crypto clients, including:

Their value add is not offering better services, but solving a problem of systemic discrimination. They serve clients no one else will.

Traditional banks are central bank–regulated, licensed deposit-taking institutions with a long history of conservative risk management and compliance procedures. They mitigate risk using techniques designed for legacy business models rather than emerging sectors. The priority is to preserve capital and comply with regulations, rather than adapt to changing market circumstances.

Traditional banks view crypto businesses as an existential threat, not as clients. This is typical in crypto, because the sector threatens established fiat banking systems that have developed over centuries. When faced with competitive technology from outside, legacy banks’ first impulse is to batten down the hatches. This approach is reflected in how they treat clients they believe violate these time-honored values.

As a result, crypto businesses routinely face structural barriers, including:

Despite this resistance, traditional banks remain the backbone of the global fiat infrastructure. They hold and maintain the licenses required to access systems such as SWIFT and to enable cross-border payments. They also possess the assets and institutional connections needed to ensure that payment channels like SEPA remain operable.

There is no avoiding reliance on traditional banks for these systems. Even blockchain-based companies require access to traditional banking infrastructure if they intend to serve clients who transact in fiat currencies.

Why Traditional Banks Still Reject Crypto Businesses in Europe

Traditional banks systematically reject crypto businesses in Europe primarily due to regulatory uncertainty. European regulations around digital assets remain a work in progress, so until MiCA is fully implemented, banks view crypto businesses as sources of undefined compliance risk. Compliance officers are not equipped to reinterpret decades-old rules for business models they cannot readily relate to. For most institutions, refusing entry is easier than investing time and resources in proper evaluation.

De-risking practices and correspondent banking threats further exacerbate the situation for crypto businesses. When traditional banks decide to serve crypto customers, they risk jeopardizing their correspondent banking relationships with large international banks. Many of these institutions maintain firm policies against handling anything related to digital assets. They will quickly sever ties with any partner bank that conducts even a single transaction involving crypto assets.

This dynamic creates a cascading effect. Even when banks are inclined to engage with crypto companies, doing so can pose existential risks to their operational systems.

At a more fundamental level, the business model of a crypto company is incompatible with legacy risk management approaches. Traditional banks assess risk using criteria such as:

Crypto companies exhibit none of these characteristics. They operate across all geographies without client location constraints, hold digital rather than physical assets, generate high transaction volumes with low average transaction values, and move funds across jurisdictions without the traditional frictions banks expect.

As a result, crypto activities trigger virtually every internal alarm associated with money laundering risk within traditional banking systems.

Fiat on- and off-ramps remove a key barrier to entry that prevents many digital asset firms from operating. Crypto neobanks enable the deposit of fiat currency that can be converted into crypto, as well as the conversion of crypto back into fiat for withdrawal or operational use. NextPay enables nearly €1B in monthly transactions for crypto customers, which demonstrates the scale of demand for these services. In the absence of bank-like infrastructure, there is no viable way for firms to allow users to move between fiat and blockchain-based systems.

Business IBANs and SEPA capabilities enable the basic banking functions crypto companies need to operate. Crypto neobanks provide European IBANs that allow firms to receive payments from customers, pay vendors, process payroll, and manage day-to-day operations. Firms also gain access to SEPA payment networks to send euro-denominated payments to European counterparts. NextPay positions its role as enabling companies to focus on building their businesses rather than repeatedly overcoming banking obstacles, by providing transaction banking capabilities and dependable access to payment networks.

Enabling a mix of on- and off-chain activities requires infrastructure that crypto neobanks are specifically designed to provide for Web3 business models. They integrate technology stacks that connect blockchain ecosystems with fiat payment rails, allowing companies to maintain both fiat operating accounts and digital asset treasuries. NextPay’s interface allows firms to combine fiat and crypto operations within a single environment, reducing friction that would otherwise arise from segregated accounts and disconnected systems.

Infrastructure differences emerge at the ground level. Crypto neobanks build their firms around blockchain business models. They impose compliance frameworks aligned with those models, rather than forcing traditional compliance structures onto new types of activity. Their infrastructure natively accommodates crypto wallets, blockchain monitoring tools, and digital asset compliance applications.

Traditional banks, by contrast, bend existing systems to allow only minimal engagement with the crypto ecosystem. In crypto onboarding, crypto neobanks generally assume that applicants already understand core concepts—wallet addresses, on-chain transactions, tokenomics—whereas traditional banks often attempt to explain these concepts repeatedly before ultimately denying applications regardless of quality.

To clarify these foundational differences, the contrast can be summarized as follows:

Support for crypto and fiat differs widely. Crypto neobanks provide multiple ways to engage with both systems, including various fiat currencies, SEPA payments, SWIFT payments, local payment rails, custody solutions, exchanges, stablecoins, and on-chain transaction processing. Traditional banks provide strong guidance on managing fiat treasuries, while refusing to permit any engagement with crypto assets.

Suitability for Web3 business models further distinguishes the two. Crypto neobanks are designed to accommodate the realities of crypto-native firms, which tend to be high-volume, international, and treasury-intensive, often combining both fiat and digital assets. Traditional banks focus on well-structured firms operating within predictable geographic and transactional boundaries, with no virtual assets involved.

Account Opening and Onboarding

Crypto neobanks typically complete onboarding in days or weeks, compared to months-long processes at traditional banks that frequently end in refusal. Crypto-friendly banks focus on smart contract audits, tokenomics, and transaction flows across blockchains, rather than treating these elements as automatic red flags.

Traditional banks go beyond denying new applications; they often terminate existing relationships without warning. As a result, the need for next-generation, bank-like services with predictable onboarding outcomes has reached crisis levels for crypto businesses.

Compliance and Risk Approach

Crypto neobanks design compliance experiences around risks specific to blockchain activity, such as smart contract vulnerabilities and weaknesses in DeFi protocols, identified through on-chain monitoring tools. Their risk frameworks account for high transaction volumes and rapid, legitimate changes in exchange behavior without automatically categorizing them as money laundering.

Traditional banks rely on generic compliance structures in which most crypto-related activity appears inherently suspicious. This frequently results in frozen accounts and service termination, rather than contextual analysis of how these ecosystems operate.

Payments and Treasury Management

Crypto neobanks provide debit cards funded by both fiat and crypto sources, along with tools for mass payouts across currencies and contractors. They support treasury structures that combine fiat and digital assets within a single operational framework.

Traditional banks remain effective at managing complex, fiat-only treasuries, but lack any meaningful way to integrate cryptocurrency into their conception of value. This creates fragmented banking experiences that force crypto firms to rely on multiple, disconnected service providers.

Crypto neobank benefits center on acceptance, speed, and functionality. They serve cryptocurrency exchanges, DeFi, NFT, and blockchain infrastructure companies that are routinely rejected by traditional banks. Onboarding typically takes days rather than months. Their infrastructure natively connects fiat and crypto, enabling capabilities such as hybrid treasuries, stablecoin payments, crypto payouts, and blockchain transaction processing—functions that would otherwise require multiple fragmented providers under a traditional banking paradigm.

The downsides relate primarily to regulatory uncertainty, potentially higher costs, and reliance on relatively immature institutions. Many crypto neobanks do not hold full banking licenses and instead operate under EMI frameworks, which protect deposits differently and do not include EU deposit guarantee insurance. Crypto neobanks are also a young industry; NextPay, for example, has been operating for several years, compared to the century-long histories of traditional banks. The introduction of MiCA regulation represents a significant disruption, creating capital and compliance challenges that may lead to market consolidation rather than the idealized Web3 vision of frictionless financial services.

Traditional banks remain suitable for established fintechs with fiat-centric operations, limited exposure to cryptocurrency activities, and relationships with more open-minded banking institutions. These firms may prioritize broader product portfolios, access to larger credit lines, and stronger deposit insurance protections. Highly regulated fintechs operating in conservative industries may also value the reputational benefits of working with traditional banks, even if those banks lack specialized crypto functionality.

For many companies, a hybrid model is emerging as the most pragmatic approach. Relying on traditional banks for fiat operations while using crypto neobanks for crypto-related activities allows firms to diversify operational risk while still accessing the capabilities required to support their Web3 and digital asset functions.

The European crypto neobank ecosystem includes both mature, EMI-licensed providers and newer entrants targeting specialized neobank or banking licenses. NextPay reflects a typical evolution within this landscape. It began as an EMI focused on serving the crypto sector, grew to process up to €1 billion per month in transactions, and is now pursuing MiCA registration to expand its offering. The market has become increasingly crowded, with hundreds of companies operating across the spectrum—from fully functioning crypto neobanks to niche service providers offering limited products such as wallets or cards.

Licenses, jurisdictions, and access to fiat rails are critical factors when assessing these banking options. EMI licenses provide a solid regulatory foundation, but they restrict the scope of activities compared to full banking licenses. Other licensing regimes offer varying levels of product flexibility. For example, Lithuania’s specialized banking license occupies a middle ground: it requires lower capital (€1 million compared to €5 million for a full banking license) while permitting a broader range of activities than EMIs.

Jurisdictional differences also play a significant role. Regulatory approaches to cryptocurrency vary widely across Europe, with Baltic states generally taking a more open stance than many other EU countries. Access to payment infrastructure further differentiates providers. Those operating within SEPA zones can serve customers across the EU through euro payment rails. Providers outside SEPA may still operate effectively but must rely on SWIFT access, which not all institutions are able to offer their clients.

Provider selection ultimately matters more than brand recognition. Factors such as licensing status, financial stability, infrastructure resilience, the sophistication of compliance and AML frameworks, and evidence of constructive engagement with regulators are far more indicative of service quality than marketing visibility. In some cases, highly visible neobanks with weak compliance or insufficient capital pose greater risks than lesser-known providers with strong regulatory relationships and disciplined risk management practices.

Emerging Web3 companies tend to favor neobanks that approve accounts quickly, impose fewer upfront demands, and provide the infrastructure required to launch products without delays caused by prolonged negotiations with conservative traditional banks. As these companies scale and begin processing larger transaction volumes, their requirements expand. They need robust institutions that can support higher payment limits, multiple fiat currencies, and treasury management processes involving millions or even billions in annual flows.

Regulated fintechs prioritize relationships with institutions experienced in serving regulated entities and capable of integrating compliance infrastructures into their financial services stack. A suitable banking partner will also be familiar with working alongside licensed payment service providers. Crypto-native companies—such as those building decentralized protocols, operating exchanges, or providing blockchain infrastructure—require deep crypto expertise to manage digital asset custody. At the same time, they need risk management frameworks that recognize blockchain activity as legitimate within formal risk profiles, a capability crypto neobanks can provide but traditional banks generally cannot.

A hybrid approach balances access, capability, and risk. Web3 firms can maintain their primary banking relationship with a crypto neobank for crypto-related operations, benefiting from rapid account opening and purpose-built infrastructure. In parallel, they can open a secondary, non-operational account with a traditional bank for payroll, vendor payments, and reserves that may benefit from stronger deposit insurance protections.

This structure reduces concentration risk by avoiding dependence on a single provider. If one banking relationship encounters disruption, an alternative route for accessing funds remains available. While traditional banks will eventually need to acknowledge the permanence of cryptocurrency, hybrid banking strategies that leverage the strengths of different systems are becoming an increasingly practical choice for sophisticated Web3 firms operating across both digital and traditional financial domains.