Voice of the Industry

Paying with cryptocurrencies: now more opportune than ever

Wednesday 27 October 2021 07:56 CET | Editor: Simona Negru | Voice of the industry

Marie Tatibouet, CMO at Gate.io, explains to The Paypers why cryptocurrencies have such a great potential as a legitimate payments service

2020 may officially go down as the year where cryptocurrencies gained mainstream legitimacy and credibility. Due to the pandemic-induced financial fluctuations, people started moving into cryptocurrencies, and especially Bitcoin as a store-of-value. However, this is just the tip of the iceberg. The potential of cryptocurrencies as a legitimate payments service is immense. 

Bitcoin payment services 

When compared to traditional payment methods, Bitcoin payment services charge lesser transaction fees. For example, BitPay charges a paltry 1% settlement fee compared to the 2% or 3% charged by traditional credit card processing services. Along with the low, there are two more obvious advantages to Bitcoin payments. 

Firstly, these payment services are borderless and allow users to send any amount anywhere in the world in a seamless manner. Secondly, Bitcoin payment is a lot more transparent than fiat payments. If you send a fiat payment to someone, it is nearly impossible for you to track the expenses. However, with crypto payments, you can use the blockchain to track payments from the source to the destination closely. 

A simple way for institutions to get their hands on BTC 

Over the past year, several institutions like Tesla, WeWork, Caruso, and PayPal have started accepting Bitcoins for their products. Tesla, in particular, made a lot of noise when they announced that they would be selling their cars for Bitcoin. 

So, why is this such major news? 

Cryptocurrencies have long been panned for being volatile and not a reliable payment method. Imagine paying for a service with X coin worth USD 50 today and worth USD 40 tomorrow. However, by accepting cryptocurrencies, these institutions are now treating them as credible assets. 

There is also another angle to this whole equation. In 2020 and 2021, it has become fashionable for institutions to dedicate a portion of their balance sheet to Bitcoins. MicroStrategy and Tesla have already spent billions in acquiring Bitcoin. By paying for their services with crypto, the companies now have a straightforward method to accumulate digital assets and diversify their holdings. 

Increasing stablecoin adoption 

Since we are talking about purely payment options, it is essential to talk about the increasing stablecoin adoption. On Black Thursday (11 March 2020), the entire cryptocurrency market fell by a massive amount due to COVID-induced panic, with Bitcoin dropping by 50%. 

As a result, the demand for stablecoins increased exponentially as investors started to move into stablecoins as a hedge against crypto volatility. Plus, lately, the trading volume of Tether has more than doubled in April to USD 171 billion, which is more than double of USA 54 billion a year ago, as per CoinMarketCap.com

Hedging risk and diversifying are not the only use cases of stablecoins. US dollar-pegged stablecoins allow crypto startups to bank in US dollars without the need for a traditional banking relationship. As such, there are two specific use cases that these startups can unlock with stablecoins.

Payments – All these blockchain marketplaces and applications need a suitable fiat-onramp to broaden their potential customer base. Stablecoins like USDC allow startups to accept payments via traditional routes such as bank cards, ACH, and wire transfers that automatically settle in USDC. 

Payroll payouts – Most crypto startups are remote-first, hiring employees from all around the world. This has been further exacerbated due to the COVID-19 pandemic, which forced more companies to adopt the remote work model. Due to legacy finance’s unwillingness to deal with anything related to crypto, using traditional methods to pay employees can be quite a pain. This is why it’s much simpler and faster for them to process payroll payments with stablecoins.

DeFi – bringing legacy financial instruments to crypto

Decentralised Finance (DeFi) has become one of the most innovative and fastest-growing spaces in crypto. Since 2020, the DeFi sector has ballooned from USD 0.70 billion to USD 59 billion – that’s a >8,000% increase in overall valuation.

DeFi has made the crypto a lot more sophisticated than a simple payment mode or a reliable store-of-value. These apps have brought traditional financial instruments into the crypto space, which are decentralised, innovative, interoperable, and composable. For example, users may swap their tokens or even apply for uncollateralised loans (aka flash loans) through platforms like Aave. Simple smart contract code makes sure that everyone is economically incentivised to work in the system’s interest, creating a decentralised, trustless environment.

DeFi payments apps are creating an open finance ecosystem that caters to the needs of the underbanked and unbanked populations. There are people around the world that don’t have access to basic banking facilities. In fact, the South-East Asia region alone has an unbanked population of >290 million.

Projects like OmiseGO and Celer Network use innovative layer-2 solutions like Plasma to empower the unbanked masses to conduct simple – and even cross-border payments through their crypto wallet. As DeFi grows more mature, it will be fascinating to see how decentralised and centralised financial instruments may co-exist to provide users with a plethora of options.

This article is part of the Payment Methods Report 2021 – Latest Trends in Payment Preferences, a comprehensive overview of the payment methods in scope for 2021, as well as best practices for checkout optimisation and customer conversion by addressing digital transformation, security, and localisation. 

About Marie Tatibouet

Marie Tatibouet is the CMO at Gate.io. As a blockchain influencer, Marie is known for spreading the importance of blockchain technology to the masses, simplifying its technicalities for the everyday user, and being a proponent for crypto evolution and adoption. 

 


About Gate.io

Gate.io enables a new generation of global traders with the tools to access the revolutionary age of cryptocurrencies. The ‘Gate ecosystem’ consists of Gate.io, Wallet.io, HipoDeFi, and GateChain. Gate.io enables blockchain enthusiasts to trade and store assets in over 670 of the leading cryptocurrencies for over 6 million users from over 150 countries. It is a one-stop-shop for spot, margin trading, futures, perpetual contracts, staking, C2C loans, options, and DeFi. At Gate.io, we strive to provide a platform that’s fast, easy to use, and welcoming to everyone. Check us out on Twitter and YouTube for interesting updates, reward campaigns, and more.

 


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Keywords: cryptocurrency, online payments, blockchain, banks
Categories: Payments & Commerce | Online Payments
Countries: World
This article is part of category

Payments & Commerce