Yet another piece on the hot topic of cryptocurrencies and how exactly they fit into payments ecosystem in the long run. This particular posting happens to be in Forbes and headlines the cross-border aspect of the conversation, which we just commented upon in these pages a couple of days ago.
The author in this case is an entrepreneur and cross-border payments specialist. The newly public Coinbase is one reason crypto is popping up daily on the radar and so the ‘asset versus payments practicality’ question is a logical one for review. And as we have stated before, not all cryptos are the same. In this case, the authors stick to the decentralized cryptos as the central point of comparison.
‘Entering the market with a $76bn valuation, Coinbase is the largest cryptocurrency exchange in the US, and a key proxy for the growing success of crypto more widely. When it was founded in 2012, such digital currencies were predominantly being used for illicit online payments, but now currencies such as bitcoin and etherium have become increasingly popular trading assets for institutional investors….However, crypto’s use is increasingly extending to the payments world, where some are extolling its benefits for cross-border transactions, arguing that it does not require conventional currency conversions, bringing speed and cost benefits….“Trading and speculation were the first major use cases to take off in cryptocurrency, just like people rushed to buy domain names in the early days of the internet. But we’re now seeing cryptocurrency evolve into something much more important,” said Coinbase CEO Brian Armstrong in a letter included in the company’s filing documents prior to its public listing….“People are using cryptocurrency to earn, spend, save, stake, borrow, lend, vote and perform many other types of economic activity.” ‘
As one looks at what has occurred during 2020, with the increasing facilitation of crypto utility through the card networks, Paypal and so forth, it is really still about conversion back to fiat currency and not the purist vision of decentralized cryptos (i.e.; bitcoin) as the actual currency of value.
Therein lies the issue with cryptos as a means of exchange, especially in B2B uses and even more so as a cross-border vehicle. Remittances are one thing, but mainstreaming of cryptos for business is quite another. There is still the conversion issue. Worth a few minutes to read.
‘Notably, such developments are not confined to consumer-facing businesses. Some B2B cross-border payments companies have also began to make moves in the space, citing interest from customers for access to the technology….One such company is UK-based Equals Group, which recently added support for cryptocurrencies in global payments through a partnership with Tap. And for CEO Ian Strafford-Taylor, adding support for cryptocurrency doesn’t represent an entry into a brave new world so much as adding support for “an exotic” in much the same way as for an unusual fiat currency….“We don’t take positions, we’re not traders, we’re flow enablers, and there’s a demand for this stuff,” he says. “We should try and provide it and we should understand it.”…However, not all payment companies are so keen. Adyen CEO Pieter van der Does, for example, told CNBC that it had no plans to add crypto payment methods, arguing that the volatility of cryptocurrencies such as bitcoin made it “more of an investment asset than a payment method”. ‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group