Last week Coinbase’s public listing on the Nasdaq
Entering the market with a valuation of $ 76 billion, Coinbase is the largest cryptocurrency exchange in the United States and a key proxy for the growing success of crypto more broadly. When it was founded in 2012, these digital currencies were primarily used for illicit online payments, but now currencies such as bitcoin and etherium have become increasingly popular trading assets for institutional investors.
However, the use of crypto is spreading more and more into the world of payments, where some tout its advantages for cross-border transactions, arguing that it does not require conventional currency conversions, which brings benefits in terms of speed and cost.
“Trading and speculation were the first major use cases to take off in cryptocurrency, just as people rushed to buy domain names in the early days of the internet. But now we are seeing the cryptocurrency evolve into something much bigger, ”Coinbase CEO Brian Armstrong said in a letter included in the company’s filing documents ahead of its public listing.
“People use cryptocurrency to earn, spend, save, wager, borrow, lend, vote, and perform many other types of economic activity.”
The rise of Bitcoin in 2021
Cryptocurrency comes to cross-border payments
Cryptocurrency has been used for payments in one form or another since its inception, and in recent years, a growing number of companies have focused on using it to facilitate payments. This includes in the cross-border space, companies such as international cryptocurrency payments provider BitPay citing its high speed and low friction as key advantages over more traditional methods.
However, with the exception of the occasional outliers, until recently, innovators and digital challengers have mostly embraced cryptocurrency, while established payment companies have remained skeptical of the technology.
But in the past 12 months that has changed. Large companies, including Microsoft
Visa card networks
“We are preparing for the future of crypto and payments right now,” wrote Raj Dhamodharan, Mastercard’s executive vice president for blockchain.
“Mastercard is not here to recommend that you start using cryptocurrencies. But we’re here to empower customers, merchants and businesses to drive digital value. “
There has also been increased support for crypto in cross-border e-commerce, especially with PayPal.
This approach, while disparaged by crypto purists as not being a true example of cryptocurrency payments due to endpoint conversion, has the benefit of protecting traders from the volatility of many digital currencies. .
“We believe this is a transition point where cryptocurrencies move from an asset class that you primarily buy, hold and / or sell to becoming a legitimate source of funding to conduct real-world transactions at millions of traders, ”Dan Schulman, CEO and chairman of PayPal, told Reuters before the official announcement.
Schulman is optimistic about his fund’s prospects with the crypto offering. During a recent Forbes event, he predicted he would reach a trade volume of $ 200 million in the first few months, although it is currently unclear how much of that is likely to be cross-border.
Paying in cryptocurrency: the positions of key companies
Cryptocurrency Shows Potential in Remittances
While there are signs of interest in cross-border e-commerce, the remittance space is also seeing the rise of cryptocurrency, thanks to a number of startups and other challengers.
BitPesa, which provides cryptocurrency-based remittances for five currencies across Africa, has traded $ 235 million in bitcoin to date and currently serves more than 26,000 customers, up from 6,000 in 2017.
Coinbase also offers a service to send money internationally using a selection of cryptocurrencies. Promising Instant Transfers, the service comes free of charge for transfers to another Coinbase account or with a nominal fee for sending money outside of the platform.
Ripple, meanwhile, has long been the organization focused on working with the money transfer space and until recently had a major partnership with MoneyGram.
There are also reports of informal cross-border remittance services using cryptocurrencies, with customers accessing agents through messaging platforms such as WhatsApp.
For established players in remittances, however, cryptocurrency remains a marginal item, if used at all.
Meanwhile, MoneyGram hasn’t made any announcements to indicate firm future plans in the cryptocurrency space after its Ripple partnership ends.
In remittances, therefore, cryptocurrency has yet to make serious inroads, although it is available to those looking for it.
Support for cryptocurrency in B2B payments
Cryptocurrency, Global Payments, and Business
In particular, these developments are not limited to companies in contact with consumers. Some B2B cross-border payment companies have also started to move into the space, citing customer interest in accessing technology.
One such company is the 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 cryptocurrency support isn’t as much of an entry into a brave new world as adding support for “an exotic” in the same way. than for unusual fiat currency.
“We don’t take positions, we are not traders, we are flow facilitators, and there is a demand for these kinds of things,” he says. “We have to try to provide it and we have to understand it.”
Not all payment companies are so enthusiastic, however. Adyen CEO Pieter van der Does, for example, told CNBC he has no plans to add crypto payment methods, saying the volatility of cryptocurrencies such as bitcoin makes it “more an investment asset than a method of payment ”.
Strafford-Taylor also expresses some concerns.
“I’m afraid at some point it’s just being driven by speculation and pop money and nothing to back it up. So it could all go wrong, and then you would make the retailers, the consumers, say ‘you should have regulated that’, ”he says.
Nonetheless, with the growing interest and support from consumers and payment companies, it is clear that we will see greater use of cryptocurrencies as a means of cross-border payment in the future.
Whether it ever rivals traditional money transfer and card payment streams remains to be seen. There is certainly a long way to go to reach such heights.