New Report: Crypto Gets Put Through the Paces on the Road to Mainstream Status
Debate around whether cryptocurrencies are an investment or spendable digital money is beginning to narrow as payments use cases gain steam, especially in cross-border B2B.
The Cryptocurrency Payments Opportunity: Driving Crypto Adoption And Use Around The Globe, a PYMNTS and i2c collaboration, gets into the finer points around the issue. Efforts to overcome crypto frictions on the path to payments is a key point the report puts across.
“If you look at the traditional methods, it was either find that one merchant who accepted [crypto] or go through this incredibly long process of going to a service like a Coinbase or an Uphold, converting your crypto into fiat, sending your fiat to your bank account [and] that might take two to four days,” said Matthew Goldman, vice president of sales and partnerships for crypto card issuer Apto Payments.
“Then it’s in your bank account and now you can start spending it.”
Goldman added that “what we’ve been able to do with our crypto-backed debit cards ... is directly connect that wallet to the card. You’re still converting your cryptocurrency into fiat currency to spend it, but we can enable it essentially to happen in real time, effectively, or the same day.”
It’s an example of the innovation driving crypto’s use for everyday payments. However, as the report states, “Merchants of all sizes also must be able to accept cryptocurrencies as swiftly and easily as more traditional forms of payment. This puts pressure on payments players to remove friction from the experience” to make merchant acceptance as seamless as other methods.
Get the study: The Cryptocurrency Payments Opportunity
Settlement Times Proving Decisive
Noting, “Businesses looking to go global are particularly interested in [cryptocurrencies] as they search for solutions that can help them ease the pain points associated with cross-border B2B payments,” the report says trials remain before cross-border digital currencies can scale.
Pavel Matveev, CEO of multicurrency digital wallet and money transfer service Wirex told PYMNTS that “[With] traditional payment and banking infrastructure, settlement time is a big issue. [The timing] really depends on the currency, but with digital [assets] you can settle as often as you want. You can even settle once per one hour, per 10 minutes [or per] minute, and obviously this is a huge improvement compared to traditional rails.”
Blockchain transparency adds a level of trust, he said, which is useful in AML/KYC compliance.
However, “Convincing businesses that remain skeptical of cryptocurrencies’ benefits to embrace them is only part of the challenge, however. The cryptocurrency payments space — especially when it comes to cross-border transactions — still is growing, and the regulations surrounding digital assets and the technologies that support them still are evolving.”
Read: The Cryptocurrency Payments Opportunity
Regulatory Hurdles Remain
Despite uncertainties around the asset class, cryptocurrencies have captured the imagination of financial services firms, consumers and businesses alike, powering the growing interest in them.
Per the report, “Consumers are finding cryptocurrencies’ potential benefits intriguing, and the global health crisis’s lingering economic impacts may have prompted more individuals to consider these alternative currencies. One recent study by digital asset marketplace Bakkt found that 48 percent of American investors bought cryptocurrencies during the first half of this year, and a further 32 percent plan to do so within a six-month period.”
While estimates from 2020 indicate that over 2,300 U.S. companies now accept Bitcoin as a payment method and early adopter financial institutions (FIs) may enjoy an edge should crypto go mainstream, challenges remain on the road to mainstream acceptance of crypto payments.
“Changing regulations, the availability of key digital infrastructure and trust all can hamper cryptocurrencies’ adoption,” the report states. “As a result, international firms that wish to make cross-border B2B payments via cryptocurrencies could face significant hurdles, meaning banks must carefully examine trends surrounding virtual currencies worldwide. Eliminating friction points is key to the growth and adoption of cryptocurrencies on a global scale.”
Download: The Cryptocurrency Payments Opportunity