Embedded Wallets: How Crypto Finally Fixed Its Signup Problem

Embedded wallets let people sign up to a crypto app with an email or a passkey instead of a seed phrase. Stripe bought the leading provider, tens of millions of accounts use them, and most teams still haven't switched.

By AnkhLabs Research, Growth research team··7 min read

Key takeaways

  • Embedded wallets create a crypto wallet invisibly when someone signs up with an email or passkey, which removes the seed phrase step where industry estimates put new-user drop-off at 60% to 90%.

  • The technology is mainstream in 2026, with Stripe owning Privy, which now reports more than 160 million accounts, and over 67 million smart accounts live on Ethereum-compatible chains.

  • Most crypto products still greet new users with a seed phrase, so teams that rebuild their first five minutes around embedded wallets convert users their competitors paid for and lost.

Embedded wallets fixed the worst step in crypto onboarding, and most marketing teams haven't noticed yet. Imagine an online store where, before you could buy anything, you had to copy twelve random words onto paper, keep them safe forever, and accept that losing them meant losing your money. That store's conversion rate would be a joke, and yet that was crypto's standard signup for a decade.

Industry estimates have long put the damage at 60% to 90% of new users dropping off at wallet setup. Those numbers come from wallet vendors rather than a formal study, so hold the exact figure loosely, but nobody who has watched a normal person meet a seed phrase doubts the direction. The clearest sign that the problem got solved came in June 2025, when Stripe acquired Privy, an embedded wallet provider then powering over 75 million accounts across more than a thousand developer teams. Privy now reports more than 160 million accounts, so the number has roughly doubled in about a year.

Losing most of your users at the front door used to be crypto's tax, and now it's a choice.

What are embedded wallets?

Embedded wallets are crypto wallets that an app creates for the user in the background at signup, usually from an email, social login or passkey, so the user never sees or writes down a seed phrase. The wallet lives inside the app's own interface, and the provider secures the keys so that recovery works like resetting a normal account.

A seed phrase is the list of twelve or twenty-four words that can rebuild a traditional wallet, which makes it both the master key and a single point of failure. Embedded wallets hide that step, and two other pieces of plumbing make the experience feel like a normal app. Smart accounts are wallets run by code, so they can batch actions, let an app pay the network fees on the user's behalf, and recover access without the words. Passkeys are the fingerprint or face logins that phones already use for banking apps, and they replace passwords altogether.

Put together, a new user taps "sign in with email", confirms with a fingerprint and is inside the product with a working wallet in seconds. When Stripe, a company built on making checkout frictionless, buys the leading provider of that experience, crypto signup has become normal infrastructure rather than an experiment.

How big is embedded wallet adoption in 2026?

Embedded wallet adoption now runs to hundreds of millions of accounts. Privy alone reports more than 160 million, Turnkey reported over 50 million in 2025, and on-chain dashboards show more than 67 million smart accounts that have made at least one transaction. The seed phrase is no longer the default for new crypto users of big consumer apps.

The public dashboards tell the same story. Smart accounts built on the ERC-4337 standard have processed about 1.29 billion operations across more than 67 million active accounts, and the newer upgrade path that arrived with Ethereum's May 2025 update now shows almost 60 million live smart accounts, up from about 54 million when we first drafted this piece. Coinbase's passkey-based smart wallet passed a million accounts in August 2025, with about 270,000 created in a single day once the Base app made it the default path. Turnkey, another infrastructure provider, reported powering over 50 million embedded wallets when it raised its Series B from Bain Capital Crypto.

What those wallets hold has changed too. Across Privy's network, stablecoins went from roughly a quarter of wallet value to around 70% in a year, with payroll firm Deel, remittance app Majority and AWS among the customers. That is the quiet rise of stablecoin adoption showing up in wallet data, because people who never wanted a crypto wallet are getting one as a side effect of getting paid.

The passkey layer underneath is measured outside crypto at giant scale. The FIDO Alliance, whose members include Google, Amazon and Microsoft, found that passkey sign-ins succeed 93% of the time against 63% for older methods, and cut sign-in time by 73%. A crypto app built on this stack onboards at the speed of a normal app because, from the user's side, it is one.

Why do most crypto apps still use seed phrases?

Most crypto apps still use seed phrases because wallet choice sits in the engineering backlog, the old flow feels safer to crypto-native builders, and the teams judge onboarding by their own experience rather than a newcomer's. The user research shows how little of the progress has reached ordinary people.

A survey of over a thousand crypto users by Reown and Nansen found 62% juggling multiple wallets and 58% unsure how smart wallets even work. The case studies that exist point where funnel logic says they should, like the game Skyweaver reporting a 73% jump in conversions after removing wallet friction. That's a vendor's number about its own customer, so treat it as a claim rather than a study, but the logic is simple enough, because when you delete the step that loses most of your visitors, more of them get through.

There's also a cultural reason. Self-custody is a core value in crypto, and many founders read "the user doesn't see a seed phrase" as "the user doesn't own their money." Good embedded wallet setups keep the ownership and remove the ceremony, and most let users export their keys or move to a full self-custody wallet later. The trade-off worth arguing about is which provider holds which part of the key, and that deserves a proper look during vendor selection rather than a blanket no.

What we'd tell a founder about embedded wallets

Audit your first five minutes like money depends on it. Sit next to someone who has never used crypto and watch them try to reach your product's first real action, counting every screen, every new word and every moment of fear. Whatever you spend on acquisition gets multiplied by the share of people who survive that path, and improving the path is usually cheaper than buying more traffic.

Make email or passkey the front door and custody a graduation. The pattern that works lets users start with a familiar login and an invisible wallet, then offers full self-custody once they hold something worth protecting and have a reason to care. Teaching seed phrases to someone who hasn't tried the product yet is asking for commitment before the first date.

Measure activation, not connection. A connected wallet is not a user, which is the lesson behind why most protocols can't reach the wallets they acquired. Define the first valuable action in your product, track the share of new visitors who reach it, and make that number one person's responsibility.

Treat wallet infrastructure as a conversion decision. Providers differ on signup success, supported logins, recovery and who controls the keys, which makes the choice a marketing decision that happens to sit with engineering. Teams that treat it that way convert users that crypto marketers usually never reach, people who would never have finished a seed phrase screen.

No more excuses at the door

For years crypto marketing had a built-in alibi, because even a great campaign died at a signup flow designed by cryptographers for cryptographers. That alibi is gone now that the biggest fintech in the world owns an embedded wallet company and tens of millions of accounts prove the approach works at scale. A product that still greets newcomers with twelve words and a warning isn't being more secure than its competitors, it's volunteering to lose the people they keep.

Frequently asked questions

What is an embedded wallet in crypto?

An embedded wallet is a crypto wallet built into an app and created automatically when a user signs up with an email, social account or passkey. The user never handles a seed phrase, and the provider secures the keys so access can be recovered like a normal account. Privy, owned by Stripe since June 2025, reports more than 160 million such accounts.

Do embedded wallets need a seed phrase?

No. Embedded wallets replace the seed phrase with a login the user already knows, such as email, Google or a passkey, and handle key storage and recovery in the background. Many providers still let users export their private key or move funds to a traditional self-custody wallet later, so the seed phrase becomes optional rather than the first step.

Are embedded wallets safe?

Embedded wallets can be as safe as traditional wallets, but safety depends on how the provider splits and stores keys and whether users can export them. Passkeys help, with the FIDO Alliance measuring a 93% sign-in success rate against 63% for older methods. Founders should check who can move funds, how recovery works, and what happens if the provider shuts down.

What is the difference between an embedded wallet and a smart wallet?

An embedded wallet describes where the wallet lives, inside an app and created at signup. A smart wallet, or smart account, describes how it works, as a wallet run by code that can batch transactions, let apps pay fees and recover access. Many products combine both, and more than 67 million ERC-4337 smart accounts have been active on-chain.

How do embedded wallets improve crypto onboarding?

Embedded wallets remove the seed phrase step, where industry estimates put new-user drop-off at 60% to 90%, and replace it with a login that takes seconds. The game Skyweaver reported a 73% rise in conversions after removing wallet friction. The bigger gain comes later, because users who get in easily can reach the product's first valuable action.



Embedded Wallets: How Crypto Finally Fixed Its Signup Problem

Embedded wallets let people sign up to a crypto app with an email or a passkey instead of a seed phrase. Stripe bought the leading provider, tens of millions of accounts use them, and most teams still haven't switched.

By AnkhLabs Research, Growth research team··7 min read

Key takeaways

  • Embedded wallets create a crypto wallet invisibly when someone signs up with an email or passkey, which removes the seed phrase step where industry estimates put new-user drop-off at 60% to 90%.

  • The technology is mainstream in 2026, with Stripe owning Privy, which now reports more than 160 million accounts, and over 67 million smart accounts live on Ethereum-compatible chains.

  • Most crypto products still greet new users with a seed phrase, so teams that rebuild their first five minutes around embedded wallets convert users their competitors paid for and lost.

Embedded wallets fixed the worst step in crypto onboarding, and most marketing teams haven't noticed yet. Imagine an online store where, before you could buy anything, you had to copy twelve random words onto paper, keep them safe forever, and accept that losing them meant losing your money. That store's conversion rate would be a joke, and yet that was crypto's standard signup for a decade.

Industry estimates have long put the damage at 60% to 90% of new users dropping off at wallet setup. Those numbers come from wallet vendors rather than a formal study, so hold the exact figure loosely, but nobody who has watched a normal person meet a seed phrase doubts the direction. The clearest sign that the problem got solved came in June 2025, when Stripe acquired Privy, an embedded wallet provider then powering over 75 million accounts across more than a thousand developer teams. Privy now reports more than 160 million accounts, so the number has roughly doubled in about a year.

Losing most of your users at the front door used to be crypto's tax, and now it's a choice.

What are embedded wallets?

Embedded wallets are crypto wallets that an app creates for the user in the background at signup, usually from an email, social login or passkey, so the user never sees or writes down a seed phrase. The wallet lives inside the app's own interface, and the provider secures the keys so that recovery works like resetting a normal account.

A seed phrase is the list of twelve or twenty-four words that can rebuild a traditional wallet, which makes it both the master key and a single point of failure. Embedded wallets hide that step, and two other pieces of plumbing make the experience feel like a normal app. Smart accounts are wallets run by code, so they can batch actions, let an app pay the network fees on the user's behalf, and recover access without the words. Passkeys are the fingerprint or face logins that phones already use for banking apps, and they replace passwords altogether.

Put together, a new user taps "sign in with email", confirms with a fingerprint and is inside the product with a working wallet in seconds. When Stripe, a company built on making checkout frictionless, buys the leading provider of that experience, crypto signup has become normal infrastructure rather than an experiment.

How big is embedded wallet adoption in 2026?

Embedded wallet adoption now runs to hundreds of millions of accounts. Privy alone reports more than 160 million, Turnkey reported over 50 million in 2025, and on-chain dashboards show more than 67 million smart accounts that have made at least one transaction. The seed phrase is no longer the default for new crypto users of big consumer apps.

The public dashboards tell the same story. Smart accounts built on the ERC-4337 standard have processed about 1.29 billion operations across more than 67 million active accounts, and the newer upgrade path that arrived with Ethereum's May 2025 update now shows almost 60 million live smart accounts, up from about 54 million when we first drafted this piece. Coinbase's passkey-based smart wallet passed a million accounts in August 2025, with about 270,000 created in a single day once the Base app made it the default path. Turnkey, another infrastructure provider, reported powering over 50 million embedded wallets when it raised its Series B from Bain Capital Crypto.

What those wallets hold has changed too. Across Privy's network, stablecoins went from roughly a quarter of wallet value to around 70% in a year, with payroll firm Deel, remittance app Majority and AWS among the customers. That is the quiet rise of stablecoin adoption showing up in wallet data, because people who never wanted a crypto wallet are getting one as a side effect of getting paid.

The passkey layer underneath is measured outside crypto at giant scale. The FIDO Alliance, whose members include Google, Amazon and Microsoft, found that passkey sign-ins succeed 93% of the time against 63% for older methods, and cut sign-in time by 73%. A crypto app built on this stack onboards at the speed of a normal app because, from the user's side, it is one.

Why do most crypto apps still use seed phrases?

Most crypto apps still use seed phrases because wallet choice sits in the engineering backlog, the old flow feels safer to crypto-native builders, and the teams judge onboarding by their own experience rather than a newcomer's. The user research shows how little of the progress has reached ordinary people.

A survey of over a thousand crypto users by Reown and Nansen found 62% juggling multiple wallets and 58% unsure how smart wallets even work. The case studies that exist point where funnel logic says they should, like the game Skyweaver reporting a 73% jump in conversions after removing wallet friction. That's a vendor's number about its own customer, so treat it as a claim rather than a study, but the logic is simple enough, because when you delete the step that loses most of your visitors, more of them get through.

There's also a cultural reason. Self-custody is a core value in crypto, and many founders read "the user doesn't see a seed phrase" as "the user doesn't own their money." Good embedded wallet setups keep the ownership and remove the ceremony, and most let users export their keys or move to a full self-custody wallet later. The trade-off worth arguing about is which provider holds which part of the key, and that deserves a proper look during vendor selection rather than a blanket no.

What we'd tell a founder about embedded wallets

Audit your first five minutes like money depends on it. Sit next to someone who has never used crypto and watch them try to reach your product's first real action, counting every screen, every new word and every moment of fear. Whatever you spend on acquisition gets multiplied by the share of people who survive that path, and improving the path is usually cheaper than buying more traffic.

Make email or passkey the front door and custody a graduation. The pattern that works lets users start with a familiar login and an invisible wallet, then offers full self-custody once they hold something worth protecting and have a reason to care. Teaching seed phrases to someone who hasn't tried the product yet is asking for commitment before the first date.

Measure activation, not connection. A connected wallet is not a user, which is the lesson behind why most protocols can't reach the wallets they acquired. Define the first valuable action in your product, track the share of new visitors who reach it, and make that number one person's responsibility.

Treat wallet infrastructure as a conversion decision. Providers differ on signup success, supported logins, recovery and who controls the keys, which makes the choice a marketing decision that happens to sit with engineering. Teams that treat it that way convert users that crypto marketers usually never reach, people who would never have finished a seed phrase screen.

No more excuses at the door

For years crypto marketing had a built-in alibi, because even a great campaign died at a signup flow designed by cryptographers for cryptographers. That alibi is gone now that the biggest fintech in the world owns an embedded wallet company and tens of millions of accounts prove the approach works at scale. A product that still greets newcomers with twelve words and a warning isn't being more secure than its competitors, it's volunteering to lose the people they keep.

Frequently asked questions

What is an embedded wallet in crypto?

An embedded wallet is a crypto wallet built into an app and created automatically when a user signs up with an email, social account or passkey. The user never handles a seed phrase, and the provider secures the keys so access can be recovered like a normal account. Privy, owned by Stripe since June 2025, reports more than 160 million such accounts.

Do embedded wallets need a seed phrase?

No. Embedded wallets replace the seed phrase with a login the user already knows, such as email, Google or a passkey, and handle key storage and recovery in the background. Many providers still let users export their private key or move funds to a traditional self-custody wallet later, so the seed phrase becomes optional rather than the first step.

Are embedded wallets safe?

Embedded wallets can be as safe as traditional wallets, but safety depends on how the provider splits and stores keys and whether users can export them. Passkeys help, with the FIDO Alliance measuring a 93% sign-in success rate against 63% for older methods. Founders should check who can move funds, how recovery works, and what happens if the provider shuts down.

What is the difference between an embedded wallet and a smart wallet?

An embedded wallet describes where the wallet lives, inside an app and created at signup. A smart wallet, or smart account, describes how it works, as a wallet run by code that can batch transactions, let apps pay fees and recover access. Many products combine both, and more than 67 million ERC-4337 smart accounts have been active on-chain.

How do embedded wallets improve crypto onboarding?

Embedded wallets remove the seed phrase step, where industry estimates put new-user drop-off at 60% to 90%, and replace it with a login that takes seconds. The game Skyweaver reported a 73% rise in conversions after removing wallet friction. The bigger gain comes later, because users who get in easily can reach the product's first valuable action.