From Wild West … to new frontier in commerce?
Bit by bit — but more than bitcoin by bitcoin — cryptos are inching into the mainstream, for both consumer and commercial applications.
There’s still fiat involved in most cases — but then, after all, seismic shifts in payments have got to start somewhere.
Among marquee announcements in just the past several weeks, PayPal, with an estimated 346 million accounts globally, said it would make cryptos a “funding source” for purchases made with its installed base of about 26 million merchants.
It’s important to note here that the cryptos are a source of conversion into fiat that uses bitcoin, bitcoin cash, litecoin and ether as crypto choices — but settles in traditional currencies (like dollars). Elsewhere, Square announce last month that it has invested $50 million — approximately 1 percent of its total second-quarter assets — to purchase roughly 4,709 bitcoins.
“We believe that bitcoin has the potential to be a more ubiquitous currency in the future,” said Amrita Ahuja, chief financial officer of Square. And Microstrategy bought $425 million of bitcoin in its latest quarter to make the holding its “primary treasury reserve asset” in order to boost returns on its balance sheet. This speaks more to an investment strategy (asset diversification, for example), we contend, than as a pivot toward using cryptos in the service of commerce.
Toward that end, and more mainstream use cases, getting the rails in place to speed and streamline transactions, regardless of the cryptocurrency used, remains key.
As spotlighted in this space, Ternio said it has joined Visa’s Fast Track as a cryptocurrency-focused enablement partner. The partnership will enable crypto companies and FinTechs come to market with crypto payments that ultimately ride the Visa rails — and are therefore accepted by any business or merchant that accepts Visa.
There are indications that the banking world is increasingly getting its arms around crypto. In September, the Office of the Comptroller of the Currency (OCC) clarified the authority for national banks and federal savings associations to hold reserves on behalf of customers who issue stablecoins (those coins have to have a one-to-one relationship with a fiat currency).
The Outlook For Stablecoins
And in the latest salvo of stablecoin use — where large-value transactions cross borders in commercial transactions — J.P. Morgan said it established Onyx, a new business unit dedicated to blockchain and digital currencies. The banking giant said that for the first time it has a paying client for its JPM Coin, its own stablecoin offering.
On a wider stage, of course, a wide swath of central banks have been studying how to create and issue their own versions of digital currencies. We’re still a ways out from making the leap from concept to reality, at least on these shores. The Federal Reserve, as has been reported, and more specifically its Boston branch, has been working with the Massachusetts Institute of Technology to explore the tech and platforms needed for such digital coinage.
As Jeremy Allaire, CEO of Circle Internet Financial, told PYMNTS’ Karen Webster, “the doors are starting to open to where, in the next two to three years, we get to a place where there are billions of people who are using stablecoins.” Allaire added, “We’re not likely to be in a world where there are, like, dozens of different dollar stable coins. I think we’re very likely to be in a world where there are two or three.”
As always, seismic change in digital payments carries with it puts and takes.
In a speech delivered this week, Fabio Panetta, member of the executive board of the European Central Bank (ECB), said the payments industry is in the midst of transformation. And he noted that Big Tech firms, due to global footprint “are uniquely positioned to offer services in the area of global cross-border transactions, where current solutions are low quality and expensive.” Stablecoins, he said, can be used as part of innovative payment solutions. But he cautioned that there are risks tied up in those coins, as consumer data can be misused, and the fight against money laundering could be hindered by traceability issues.
It could also make the European payment system unfit to support our single market and single currency and vulnerable to external disruption, such as cyberattacks, he said in the speech.