Wallet Wars Part 4: The Battle for Digital Sovereignty

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Hey Fintech Nerds 👋

Stripe’s CEO has been shocked at the real-world growth in Stablecoins, and says every company will need a Stablecoin strategy.

Does that line sound familiar? That’s Cuy Sheffield from Visa’s line, we even did an entire episode of the Tokenized podcast on it.

We’re seeing a Stablecoin bill (the GENIUS bill), which is predicted to pass Congress in 6 months, and the SEC aims to deliver as much regulatory clarity as possible, as soon as possible. 

Earnings season is in full swing. While every CEO gets asked about DeepSeek, they’re not being asked about Deel, Chime and Klarna. This quiet period before the IPO window breaks is going to be crucial. Will the markets hold, or are they too nervous to sustain the AI momentum?

PS. In a last minute swerve, I’m in SF next week Tuesday, Wednesday and Thursday AM, I have a couple of slots open, reach out if you’re there. I’m prioritizing people who want to know more about Sardine 🐟

Here's this week's Brainfood in summary

📣 Rant: Wallet Wars Part 4: The Battle for Digital Ownership

💸 4 Fintech Companies:

1. Boom Pay - Embedded Finance for Real Estate.

2. Sencillo - HELOC meets Financing School fees (UK)

3. Hub2 - Stripe for Francophone Africa

4. Stay - Pension & Benefits as a Service for Brazil

👀 Things to Know:

1. Stripe’s $1.1b Bridge Acquisition complete

2. The FDIC “Operation Chokepoint 2.0” pause letters published.

3. Robinhood is suspending Sports Betting contracts after a CFTC request.

📚 Good Read: Time to Overweight European Stocks?

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Weekly Rant 📣: Wallet Wars Part 4 — The Battle for Digital Ownership

The wallet wars are in full swing.

While everyone's distracted by AI agents and commerce debates, a quiet revolution is brewing in our pockets. Not for payments or even stablecoins.

It's about who controls your entire digital existence.

Think about it. Your wallet is slowly becoming the gateway to everything you own, everything you are, and everything you can do. But there's a dangerous tension at the heart of this transformation:

The more powerful wallets become, the more their creators want to own you.

Apple holds 51% of the US smartphone market, turning your identity into their asset. Banks are launching Paze, seeking to control your financial life. PayPal pushes Venmo, building walls around your money. Big Tech sees wallets as the ultimate data honeypot – a window into everything you own, do, and are.

But what if there was another way?

What if your wallet could be truly yours?

Welcome to Part 4 of the Wallet Wars, where we explore how the marriage of tokenization, AI, and self-sovereignty might just give power back to the people – and why this time, the underdogs might win.

What is a wallet?

Pay attention. This bit is critical.

A digital wallet is not an app, but a secure container. 

Just like your physical wallet holds things that prove what you can do (credit cards, ID, membership cards, pictures of your cat), a digital wallet holds digital versions of these proofs - we call them tokens. 

But unlike your physical wallet, a digital wallet can be

• Programmed,

• Automated,

• and containers for AI agents that act on your behalf.

Quick Recap: How Did We Get Here?

The wallet story so far:

Part 1: showed us wallets becoming identity containers. Your wallet isn't just for payments - it's becoming the home of your digital identity, letting you tap to prove who you are, what you own, and what you can access.

Part 2: revealed wallets as the home of AI agents.

Part 3: tackled the authentication crisis. We need to move from proving "You are the correct human" to "proving you're authorized on behalf of the correct human."

Now in Part 4, we face the biggest question: Who actually controls your digital life?

You don’t have to read the first three before this one, but it’s going to really help if you did

Tokens live in Wallets and help you do things on the internet securely.

Imagine every significant thing in your digital life as a secure, programmable object – a token. Your driver's license becomes a digital credential you control. Your house deed becomes a digital asset you can fraction and trade. Your car keys become digital tokens that you can instantly share with family.

The tokenization of everything is already happening:

As I wrote in Tokentech, the future of finance.

In financial services, "tokenization" is usually shorthand for one of two things.

1. That's how Apple Pay, Visa, and Mastercard all work.

2. Real World Assets (RWAs) like stocks, bonds, and commodities represented on a Blockchain network 

But to understand the nuance here, I want you to pay attention to a broader category set. 

In financial services, we're heading towards an explosion of tokens, and they'll become the battleground in technology, payment rails, and network effects for the next decade (they are already for cards).

We're seeing three massive waves of “tokenization”:

1. Payment Tokens - Now mainstream and slowly becoming the standard

• Credit cards become secure tokens in Apple Pay

• Bank accounts become "Pay by Bank" tokens

• Visa Flexible Credential etc

2. Identity Tokens - Slowly gaining traction

• Government IDs become verifiable credentials (e.g. The UK now supports digital passports on Apple and Android)

• Passwords become passkeys (FIDO2)

• Loyalty cards become programmable points

• Personal data becomes encrypted tokens

3. Asset Tokens

• Stablecoins like USDC or PayPal PYUSD 

• BlackRock tokenizing traditional assets like Treasuries. securities, bonds, everything Blackrock CEO Larry Fink predicted

• Alternatives like private credit and private equity from Franklin Templeton

• Even intellectual property rights as tokens

Each wave builds on the last. 

When something becomes a token, it gains new powers:

• A token can't be copied (unlike a photo of your ID)

• A token can't be used without your permission (unlike a stolen credit card)

• A token can be programmed (your house deed could automatically transfer rent to your bank account)

• A token can be verified instantly (no more waiting for background checks)

When everything is a token, everything becomes:

• Provable (this human or their AI agent did this thing)

• Programmable (now lets do 10 more things)

• Portable (and move these assets, or loyalty points from A to B)

But these tokens need a place to live and be managed. They could live in a centralized wallet. But the core tension remains. Which wallet gets to control your digital life, and which one would host your personal AI agent?

The State of Wallets: Digital Feudalism

Let's be honest: today's digital wallets are a mess.

At best they’re limited. Walled off from the open internet. Like the AOL version of the internet. The Apple Wallet hasn’t had it’s “app store” moment. At worst, they’re honeypots to own your identity and monetize you. (You can see this in how hard Apple fights with card issuers over interchange revenue for example). 

The promise was financial freedom. The reality is digital feudalism.

To understand why, we need to look at the three types of wallets competing for your digital life:

1. Corporate Wallets (Apple Pay, Google Pay, Banking Apps)

• What they hold: Payment cards, basic ID, tickets

• Who controls: The company (Apple, Google, Banks)

• Key limitation: Locked to their ecosystem

• Example: Apple Pay with 60+ million US users, but you can't truly export your data or identity

These wallets dominate market share today. But there’s a catch. They will only ever support the things their creators have integrated, sanitized, or benefit from. Apple is thrilled to integrate BNPL providers like Affirm and Klarna for a revenue cut, but what about everything else?

2. Hosted Wallets (Coinbase, Binance, or how Cash App and Revolut hold Crypto)

• What they hold: Cryptocurrencies, tokens

• Who controls: The wallet provider

• Key limitation: Still custodial - "not your keys, not your coins"

• Example: Coinbase has a simple UX but can block or close an account if they suspect a scam or money laundering.

The hosted wallets from Neobanks balance being able to see your TradFi assets alongside your Crypto assets. You could imagine this going further if say, Cash App integrated open banking to aggregate all of your TradFi and DeFi assets into a single pane of glass.

The challenge is the business model. Digital wallets will always want to cross-sell products they benefit from and control. Partially to manage the significant risk they take in providing that service, and partly to maximize their upside.

3. Self-Hosted Wallets (MetaMask, Phantom, Coinbase Wallet)

• What they hold: ANY compatible token (payment, identity, asset)

• Who controls: YOU

• Key limitation: Currently complex UX and a high risk (lose your keys, lose your entire net worth)

• Example: The horrific example of the Ledger founder being kidnapped recently to steal their assets. 

Here's the crucial distinction most people miss: Only self-hosted wallets can truly hold ANY type of token. Corporate wallets and exchange wallets are like fancy bank vaults - convenient but controlled by someone else. This ability to hold any token makes them much more open. And in the long run, open usually beats out closed. 

Yet Crypto and self-hosted wallets still have a massive gap to the centralized, traditional payment wallets. They’re still a “Crypto thing” and not a useful thing. The UI’s are designed around buy/sell/hold/trade and not daily life.

The numbers tell the story:

• Being a core wallet is hard: 60+ million Americans use Apple Pay vs 35m for MetaMask or Phantom’s 15m monthly actives

• Global is hard: PayPal has 400 million users, Alipay has nearly 1.3bn vs Coinbase has 105 million.

• Self hosting is hard: 20% of all Bitcoin (over $100 billion) is lost due to poor key management

Something isn't working with self-hosting and the current UI of self sovereign wallets

So how can open ever beat closed if it’s so difficult to use? 

So if self-hosted wallets are so hard to use, how can open ever beat closed? The answer lies in how tokens and wallets work together.

Fintech Companies are launching Self Hosted Wallets

There’s a solid business case for DeFi as the financial infrastructure instead of Tradfi

My thesis is that everything will be tokenized, and as that happens, the utility of wallets will increase. And I think Robinhood’s CEO agrees, at least if you read their recent Wall St Journal Op Ed. 

I also spotted this in a recent Yahoo Finance article (emphasis mine).

And they’re not alone.

• Block (Square) launched Bitkey, a self-custody wallet with backup keys 

• Privy enables one-click wallet login across apps (e.g. Login with your Gsuite or Email and behind the scenes you’ve got an invisible wallet that holds tokens)

BaaS let fintech companies build on banking infrastructure. Self-sovereign wallets, DeFi and blockchain networks are the next evolution:

• Instead of connecting to a bank's core → Connect to public blockchain infrastructure

• Instead of paying for BaaS → Use open protocols for near free

• Instead of being limited by bank reconciliation → The network does that for you

The economics that made BaaS attractive to fintech companies make public infrastructure even more compelling. This in itself, is a massive unlock, and not to be understated. But in the context of the wallet wars, there’s a bigger picture, of authentication and identity to consider.

Wallets are so much bigger than using DeFi instead of TradFi “rails”

Imagine a wallet that does for your digital life what a smartphone did for communication – a smart, all-in-one command center for managing value and identity. 

In this big vision, a crypto wallet isn’t just an app to check token prices; it’s your 

• Personal CFO, 

• ID vault, 

• and AI financial advisor rolled into one. 

This “perfect wallet” could, for instance, automatically swap assets to get you the best deal when you pay (spending your cash or crypto or reward points interchangeably), manage your subscriptions and budgets via smart contracts, and securely store your IDs, tickets, and certifications as verifiable credentials. 

It might even talk to you 

• An AI that warns you if you’re about to do something dumb (“Are you sure you want to ape into that memecoin at 2 AM?”), 

• or that finds you the best yield for your savings while you sleep. 

In short, the wallet could graduate from a static storage tool to an active, intelligent financial agent.

We're witnessing the convergence of:

• Traditional finance products like banks, cards, payments. They’re all becoming accessible from wallets and open banking (both of which use tokens).

• Digital finance like crypto, stablecoins and tokenized assets. Every TradFi asset has a tokenization equivalent and giant Wall St firms making it happen.

• Identity and authentication systems. Government identities are coming to your wallet as “tokens”, Passkeys replace passwords as “tokens” 

• AI agents and automation. Taking on tasks like finding and booking flights and a hotel on your behalf.

The first three of these all use tokens, and in the world of Crypto, so do the AI Agents.

These tokens are fundamentally different in their standards and how they operate. Scratch beneath the surface and an open banking token, is wildly different to a Bitcoin.

The challenge of making different token types work together is massive. Think about it:

• A card token in Apple Pay speaks one language

• A stablecoin like USDC speaks another

• A government ID token speaks yet another

Your wallet needs to handle all of that.

The key is making this complexity invisible to users. Just as you don't think about email protocols when sending a message, you shouldn't have to think about token standards when using your wallet.

The Wallet + Token + AI + Identity Future

Here's where everything changes.

AI is coming to manage your entire digital life. But for AI to truly serve you (and not Big Tech), it needs three things that only self-sovereign wallets can provide:

1. Secure access to YOUR data (not Apple's view of your data)

2. Universal authentication (not fragmented across 50 services)

3. An immutable audit trail (not controlled by any single company)

Think about how much time fintech companies spend on KYC and authentication. Now imagine if every customer came with cryptographic proof of their identity, pre-verified, that could be instantly checked. That's what self-sovereign identity enables.

It also enables AI to be truly in your corner, not acting like a product shipped by a company.

Traditional wallets can't yet provide this. As we explored in Part 3:

I doubt Apple will ship fast enough to truly unleash self soverign AI Agents. They want their 30%, the banks want their upside. The commercial incentive of most wallet providers is adversarial to yours.

The self-sovereign wallet provides:

• An open platform for development (any AI could be compatible)

• Cryptographic proof of ownership of assets, identity and authentication (your keys)

• Transparent transaction history of what you or your agent did (on chain)

• Programmable permissions over how assets, identity and authentication can be used (smart contracts)

Your AI agent can prove it's acting for you because it lives in your self-sovereign wallet, using public key infrastructure (PKI) to sign transactions and manage permissions.

We're already seeing primitive versions of this with robo-advisors and automated trading. But those are limited by access to customer data and authentication. Self-sovereign wallets remove these limitations, allowing AI to truly act as your financial agent.

The Final Battle

The conventional wisdom says Big Tech wins everything. They have the users, the trust, the distribution. The conventional wisdom makes some great points when you look at current and trending market share.

But from first principles 

• Nobody sees all of my assets except me.

• I am the primary key to aggregate all of that

• So we need a way for software to let me manage that

• Wallets are the ideal software

• But the centralized wallets have incentive and risk issues

DeFi wallets are nowhere on identity yet.

But they’re already way ahead on self-hosted AI Agents.

The next phase is about moving out of our finance lens, and into the identity and authentication lens. This is internet, commerce and identity infrastructure.

There’s no guaranteed winner. And right now the big tech wallets have all of the advantages. 

But if I’ve learned one thing over the past two decades in this industry. Never, ever bet against the weird, small, innovative underdog.

So ask yourself.

Will your wallet be:

• The new “universal banking account”?

• Provided by big tech or your bank?

• Or truly yours and able to act in your interests?

The technology exists. The standards are emerging. The user demand is growing.

The answer was always self-sovereign wallets. We just needed the technology to catch up to the vision.

Tokens will mediate every interaction, and wallets are the natural home for this new token-based world.

The revolution will be tokenized.

And this time, it will be self-sovereign.

ST.

---

*PS. This is why we named the new podcast Tokenized. Because yes, right now the focus is on Stablecoins, and asset tokens, but that will change. Just you watch.

On May 29th, my good friends at This Week in Fintech are running an entire event dedicated to Stablecoins. Stablecon. This is the place to be if you want to see what got Patrick Collison so shocked and where you need to be placing your bets.

4 Fintech Companies 💸

1. Boom Pay - Embedded Finance for Real Estate.

Boom Pay provides property managers tenant screening and rent reporting in a SaaS platform. Residents get a "resident app" and can "anage paymen" s through the service. It also reports on time payments to help residents build their credit score.

🧠 Is this whitelabel Bilt? It could be in time. Managing payments and credit reporting is a huge value add for renters. Ensuring on-time payments is a headache solver for property managers.

2. Sencillo - HELOC meets Financing School fees (UK)

Sencillo helps parents finance and spread the cost of daycare and private school fees in the UK by unlocking their home equity. Parents can spread the fees over a longer time period to make the short term costs lower.

🧠 Childcare fees are often higher or higher than a mortgage for much of the UK. Private school fees are now also taxable under the new Labor Government, forcing many middle-class families who strived to make private school payments out of the market. Unlocking home equity fees like a leg-up that could work for many.

3. Hub2 - Stripe for Francophone Africa

Hub2 works with 55 Neobanks and payments companies to offer pay-in and payout capability. They advertise a success rate on payments of between 97% and 98% vs. 50% from competitors.

🧠 There's no e-commerce There'snts if they only work 50% of the time. Paystack proved this aggregator model works in English-speaking Africa, and Hub2 is now bringing that to some massive markets with mobile money.

4. Stay - Pension & Benefits as a Service for Brazil

Stay is a platform that helps employers build and run benefits programs for their staff. Staff can manage their benefits and stay tax-advantaged through Whatsapp. Staff get a savings calculator for taxes and a dream calculator for investment goals. Companies get a customized program from the Stay team.

🧠 As Brazil's digital sectorBrazil'sso do the companies serving it. There are some clear market nuances, like WhatsApp being the default UI for users, and I wonder how scaleable the custom implementations can be. I'm also curious what tI'mtion this gets, vs say, the US, where the Gusto's of the world beGusto'sap around platforms for much more than benefits.

Things to know 👀

1. Stripe’s $1.1b Bridge Acquisition complete

Bridge CEO Zack Abrhams and Stripe CEO Patrick Collison both confirmed their completion on X. The most telling comment is from Patrick who said “We expected Bridge … to grow very quickly, and we're nevertheless shocked at just how rapidly adoption is exploding. In the coming years, everyone programmatically moving money will likely want a stablecoin strategy.

🧠 Every company needs a stablecoin strategy. The $1.1B question isn't whether your company needs a stablecoin strategy - it's whether you'll build one before or after your competitors. But here's the critical part: The winners will be those who learned from the BaaS meltdown and bake in risk controls from day one.

🧠 I keep getting asked “what should we do with Stablecoins?” And I keep answering, are most of your customers domestic? If the answer is yes, then go lobby for regulatory clarity. If your goal is cross-border flows, then it’s a much more complex answer.

🧠 The B2B and B2C payments volume is exploding. Payouts to the global south, or payments from those countries to US companies are unlocked by Stablecoins. We had companies like Thunes, Wise, or Citi who could do cross-border cheaply at scale. But stablecoins are winning on BPS and speed.

🧠 History rhymes: When PayPal made digital payments easy, e-commerce exploded. When Plaid made bank data accessible, fintech exploded. Now Bridge makes global money movement instant. So there’s 1,000 Stablecoin companies, most of whom will fail. How do you get it right?

🧠 Crypto clarity is coming. The Genius bill aims to create legislative clarity for Stablecoins. It will establish reserve requirements (to avoid a Terra/Luna style blow up). Fed has jurisdiction above $10bn assets, States below. The new SEC Crypto task force will define security, build a regulatory sandbox (with no action letters), and define staking (yield) and cross-border rules.

2. The FDIC “Operation Chokepoint 2.0” pause letters published.

The FDIC has published minimally redacted letters it sent to banks and financial institutions. This number is far larger than the initial 25 released under a freedom of information request under the previous administration. The new FDIC press release notes that the FDIC would repeatedly ask banks to pause, then for more information, then go for multiple months of silence. This prevented any Cryptoasset-related activities from continuing.

🧠 “Have you read the letters though?” Yes I have. The letters all basically say, please pause while we look at this closer.

🧠 “See it’s not a chokepoint then!” No it kinda is. Well, no, imagine you run a Shopify store, and someone says pause business on your new product lines while we investigate. So you do. And then 3 months later they ask for more information. So you send it. Then you hear nothing for 3 months. Then they ask for more. Then nothing for 6 months. Would you get the message?

🧠 What’s not disclosed are the confidential meetings. Regulators can say behind closed doors “If you do this life will be very hard” and that would never be written down. There’s no audit trail, and there’s plausible deniability.

🧠 It’s kind of obvious the prior FDIC administration would like it if Crypto went away. Everything in regulation is signalling. “We can’t tell you to stop but…” - It’s naive to assume otherwise. Yes there were bad actors like FTX and Celcius, and there will be more in the future. But marginalizing the good actors is counterproductive.

🧠 The frustrating thing is this didn’t make banks more safe or sound. It didn’t protect consumers. It just let uncertainty run and run and run. And when you push good actors out of the system, you get memecoins and little else.

🧠 Tokenization and stablecoins are inevitable. The question is when and under what regulatory guardrails. These are good things. Upgrades to the system. And they require regulatory clarity.

3. Robinhood is suspending Sports Betting contracts after a CFTC request.

Robinhood will suspend its newly introduced Super Bowl events contracts after a formal request from the Commodity Futures Trading Commission to “not permit customers to access” sports event contracts.

🧠 A republican administration doesn’t mean anything goes. There’s an almost jubilant air among businesses that they can launch anything, but this move from the CFTC proves the regulators are still very much at their desk.

🧠 Let’s not just devolve into a casino economy shall we? There are legitimate arguments to be made for sports betting, but there are even more legitimate concerns about consumer harm. I’d love to see how Robinhood plans to prevent that from creating a blow up as a part of this story as it moves forward.

Good Reads 📚

1. Time to Overweight European Stocks?

The incredible Marc Ruby is at it again with a breakdown of how US Stocks have wildly Outperformed Europe over the past two decades. But investor sentiment says that's about to shift. The Mag 7 tech stocks, passive investing, and strong demand for those products make the US stock market at an all-time high.

Meanwhile, countries like Poland are growing faster than the US. Its asset management sector is consolidating, which may close the credit-provision gap compared to the US, and it has more room for interest rate cuts than the US might.

🧠 This is less a story about European dynamism than it is about the US advantages of having less gas in the tank. The recent DeepSeek AI panic compounds the narrative that the US is wealthy, but its oligarchy is also fat and bloated (while claiming that's the issue with government).

🧠 The Tech Bro Military Industrial Complex is as vulnerable to regulatory capture as the one that preceded it. It's good to come from a place of competition and want to win. It's bad to spoil for war or donate to a president's inauguration to curry political favor. Over time, that capture has led to less competitive markets, not more competitive.

🧠 Meanwhile, Europe is still a bureaucratic nightmare. I'd love to see a future vision rooted in liberal values and a more positive view of migration, inclusion, and diversity. But also one that unleashes the private sector. It disgusts me that the only way to be fiscally conservative in the US is to harp on about the "woke mind virus" and point at a handful of tragedies to somehow normalize the demonization of a wider group of people.

Tweets of the week 🕊

That'ss all, folks. 👋

Remember, if you are enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

(1) All content and views expressed here are the authors'' personal opinions and do not reflect the views of any of their employers or employees.

(2) All companies or assets mentioned by the author in which the author has a personal and/or financial interest are denoted with a *. None of the above constitutes investment advice, and you should seek independent advice before making any investment decisions.

(3) Any companies mentioned are top of mind and used for illustrative purposes only.

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held

(5) Citations may be missing, and I've done my best to cite, but I will always aim to update and correct the live version where possible. If I cited you and got the referencing wrong, please reach out