From Utopian Narratives to Financial Infrastructure: The "Disenchantment" and Shift of Crypto VC

Original Authors: Suvashree Ghosh, Matt Haldane

Original Translation: Saoirse, Foresight News

Not long ago, the crypto industry was loudly proclaiming "blockchain, not Bitcoin," claiming that distributed ledger technology would surpass financial applications and completely reshape the internet. However, recent funding trends indicate that, in the real world, cash is still king.

Since the Web3 and NFT craze subsided in the early 2020s, investment enthusiasm in the crypto industry has noticeably cooled. Yet, one niche area in the market has been attracting increasing amounts of venture capital against the trend — stablecoin payments.

Stripe's acquisition of Bridge for $1.1 billion last year was an early signal that traditional financial institutions are beginning to lay the groundwork for stablecoin payments. Subsequently, a number of startups, including ARQ, KAST, and RedotPay, have secured new funding to build cross-border payment channels and stablecoin-based financial services. Mastercard's acquisition of BVNK for $1.8 billion last week further confirmed the market's strong interest in this sector.

"Startups related to stablecoins are currently one of the hottest areas for venture capital funding," said Rob Hadick, a general partner at Dragonfly Capital. "Stablecoins have emerged as a distinct entity within the crypto industry, becoming one of the few truly groundbreaking applications that have achieved widespread real-world adoption."

According to data from Architect Partners, which focuses on annual reports of crypto financing, the total funding for crypto payment companies is expected to soar to $2.6 billion in 2025, surpassing the total of the previous three years combined. Following Mastercard's acquisition of BVNK, this figure is expected to continue climbing this year.

Crypto payment infrastructure financing: 2025 funding amounts for companies exceed the total of the previous three years

Meanwhile, overall private equity financing in the crypto industry increased from nearly $13 billion in 2024 to $20.4 billion in 2025, but it is still below the peak of $27.6 billion in 2022.

Total financing for cryptocurrency companies: The number of crypto financing transactions rose last year but has not yet reached the peak of 2022.

Currently, the two areas with the highest concentration of private equity funds are "investment and trading infrastructure" and "brokers and exchanges," both of which are financial application businesses. Payment infrastructure ranks third. In stark contrast, the gaming sector, which was at the core of the Web3 and NFT craze, saw its funding drop from $3.76 billion in 2022 (accounting for about 14% of total funding) to no longer being listed as an independent statistical category in 2025.

In fact, various decentralized applications (Web3 functional layer) collectively raised $5.2 billion in 2022; however, the 2025 report retains only consumer DApps, with funding amounting to just $864 million.

Funding situation in various segments of cryptocurrency: The payment sector ranks among the top three sub-industries attracting funding in 2025

Stablecoins are building a more complete financial infrastructure for blockchain. These tokens are typically pegged 1:1 to the US dollar, with their value tied to underlying assets. Driven by the pro-crypto policies of the Trump administration, market enthusiasm for stablecoins reached unprecedented heights last year.

According to data from Artemis Analytics, the total transaction volume of stablecoins is expected to surge by 72% in 2025, reaching $33 trillion. The two largest stablecoins by market size are Tether's USDT and Circle's USDC.

Circle's stock price hit its largest drop ever on Tuesday as investors assess the potential adjustments in US stablecoin regulation and the impact of intensified industry competition. However, the core appeal of stablecoins remains clear: to transfer funds as efficiently as possible.

Cross-border payments are still slow, costly, and require significant capital. Despite years of fintech development, cross-border transfers still heavily rely on pre-funded accounts opened in different jurisdictions.

"Stablecoins have completely changed this landscape," said Prajit Nanu, co-founder and CEO of cross-border payment company Nium. "They allow value to flow in real-time across the globe without incurring the same level of capital efficiency loss, which is why investors see them as the core infrastructure of next-generation payments."

This industry still has strong "gatekeepers." Large payment networks like Visa and Mastercard control access to payment terminals. Eric F. Risley, founder and managing partner of Architect Partners, wrote in the report that the issue of channel distribution "is a major concern for every stablecoin and related payment company."

Binance spot trading market share trend chart

As of February this year, Binance's share in Bitcoin spot trading has dropped to 27%, while its overall trading share fell from 52% to 32%. Its most profitable derivatives business share has also significantly declined, down to 34%.

Franklin Templeton, in collaboration with Ondo Finance, launched ETF tokenized products that can be traded around the clock through crypto wallets, bypassing the brokerage accounts and time-limited trading rules that have relied on for decades.

Industry Voices

"The irony of this event being held in Las Vegas is palpable," said Ben Johnson, head of client solutions at Morningstar. This industry "has completely crossed the line between investment and gambling, with no room for retreat."

Originally designed to simplify investing, ETFs have now become vehicles for America's latest form of financial gambling. Bloomberg Intelligence data shows that among the 1,000 new funds issued last year, 36% were leveraged products or crypto-related funds.