Top US-based crypto exchange platform Coinbase is announcing a new on-chain payments protocol. In a new company blog post, Coinbase says that it’s setting a new standard for on-chain payments that will make them cheaper and faster for consumers. According to Coinbase, the open-source update will ensure “clarity, reliability, and a consistent experience for all […]
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Sarah Clark, the CEO of E-Gates, believes that traditional finance needs to adopt features of decentralized finance as part of an evolution instead of seeing it as a revolution.
As decentralized finance grows in popularity, many wonder what the future holds for traditional finance (TradFi). In episode 37 of Cointelegraph’s Hashing It Out podcast, Elisha Owusu Akyaw talks to Sarah Clark, the CEO of E-Gates, about how TradFi plans to compete and collaborate with the Web3 space and what that means for global payments moving forward. The episode also highlights issues around Web3 payments, such as regulatory compliance, fraud prevention and customer trust.
Clark has worked at multiple TradFi firms like PayPal and Barclays before pivoting to Web3. She explains that conventional finance could benefit from integrating blockchain technology and Web3 practices to solve major gaps like cross-border payments. Clark argues that these changes should be seen as an evolution instead of a revolution.
On using cryptocurrencies as payments, Clark identifies two main issues: acceptance and trust. She states that the number of merchants today that accept cryptocurrency is small, and there is a need for that to change for crypto-powered payments to take off. Clark explains there is a significant burden on Web3 payment providers to build trust among regulators concerned about funding sources and the potential use of cryptocurrencies to fund illicit activities. At the same time, consumers, too, have fears about the safety of their funds.
Clark argues that the issue with regulations cuts across all forms of innovation, and the frustrations with regulators go beyond Web3 to Silicon Valley. She explains that too much regulation could stifle innovation and add more friction for end users who want a simple user experience. The CEO believes that regulators must move away from existing regulations that benefit incumbents and disadvantage new systems that did not exist when most laws around finance and technology were crafted.
“We face a very similar challenge in the crypto space in terms of regulators not necessarily understanding. And then their instinctive reaction is to be more prescriptive rather than embracing the progress that can come from new technologies and setting a level playing field and saying all payment methods, whether it’s fiat credit cards, digital wallets or crypto, have to meet these thresholds.“
Listen to the full episode of Hashing It Out on Apple Podcasts, Spotify or TuneIn. You can also explore Cointelegraph’s full roster of informative podcasts on the Cointelegraph Podcasts page.
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It’s not a matter of will big-name companies follow Ferrari’s lead to adopt Bitcoin, but when, according to CoinFlip CEO Ben Weiss.
Ferrari’s decision to allow U.S. residents to buy its cars in exchange for cryptocurrencies like Bitcoin (BTC) has become one of the biggest market wins in 2023, according to the CEO of the Bitcoin ATM operator CoinFlip.
Ferrari has been aware of the growing demand from clients for alternative payment solutions and decided to support dealers in meeting these clients’ requests, the representative said, adding:
“The source of the cryptocurrencies will be proven, and volatility risks associated with exchange rates will be eliminated. Dealers — and ultimately Ferrari — will receive payments in traditional currency and will not be managing cryptocurrencies directly.”
Ferrari added the crypto payment support by integrating BitPay, a major crypto payment firm serving global brands like AMC Theaters, the electronics retailer Newegg and others. According to BitPay, Ferrari customers in 10 U.S. locations — including Washington and Las Vegas — can now exchange their crypto for a top Ferrari car model like SF90 Stradale, Ferrari Purosangue, Daytona SP3 and more.
According to CoinFlip CEO Ben Weiss, Ferrari’s move to accept crypto payments is significant for the market. “Their notable reputation can increase adoption, cryptocurrency value, and consumer confidence,” Weiss said, suggesting that their crypto move is also likely to spark interest from lawmakers to develop clear regulatory frameworks.
Weiss believes that Ferrari’s push will eventually push more traditional global firms to accept Bitcoin as payment. He said:
“It’s not a matter of will big-name companies follow Ferrari’s footsteps, but when. Bitcoin is the best performing asset of the decade proving it’s here to stay and encouraging other big names like PayPal and BlackRock to embrace digital assets.”
Ferrari’s decision to adopt cryptocurrency payment has come in line with aspects related to environmental, social and corporate governance, the firm’s representative told Cointelegraph.
“The analysis of data regarding the environmental impact associated with cryptocurrencies has been a fundamental part of our decision-making process to adopt cryptocurrencies — in line with our objective to become carbon neutral by 2030,” the spokesperson stated.
Related: Crypto payment option for Honda cars only works via third-party platform
According to industry analysts, the share of Bitcoin mining energy from renewable sources exceeded 50% as of mid-September 2023. However, Elon Musk’s Tesla still hasn’t adopted the BTC payment option after halting such payments in 2021 over carbon concerns.
“Tesla still accepts Dogecoin, and Elon continues to be a proponent of crypto,” CoinFlip CEO Weiss noticed, adding that the Tesla founder could also boost crypto adoption by introducing it to the social media platform X (formerly Twitter). He said:
“Elon also has significant experience with payments from his PayPal days and if Elon decides to bring payments to X, as many expect, crypto would be a natural payment rail.”
In a publicly accessible doc titled “What You Need To Know If You Use Bitcoin,” Tesla listed several facts about the cryptocurrency, including that Bitcoin payments are irreversible.
“That’s just the way the Bitcoin network works — no do-overs. So please make sure you enter the correct Bitcoin price in the amount field and the correct Bitcoin address in the recipient field,” the document reads.
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Stablecoin issuer Circle is investing in a new layer-1 blockchain as a means of expanding the use cases for USDC, its dollar-pegged digital asset. In a new company blog post, the Sei Network (SEI) – which claims to be the fastest blockchain in the world – says that Circle’s venture capital branch is investing in […]
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Crypto payments are often seen as a way to boost adoption, but is adoption growing if the business sells crypto right back? The answer is complex.
Cryptocurrency enthusiasts often argue that businesses need to start accepting crypto as payments for adoption to grow — boosting usability and potentially creating strong demand for these currencies.
Some crypto communities often focus heavily on growing business adoption, with maps now compiling businesses worldwide that accept different cryptocurrencies as a payment method.
But if a business accepts cryptocurrency payments only to dump them on the market, it may undermine the entire effort, as the assets are just being sold back on the market right after payment.
Moreover, a business accepting cryptocurrency payments through a third-party processor isn’t adhering to the cryptocurrency ethos of managing their own private keys, meaning controlling their wallet fully.
On the flip side, proponents argue that the mere act of enabling cryptocurrency payments opens up new avenues for consumers to transact in crypto, bringing in a new, long-awaited use case.
On its surface, a business accepting cryptocurrency payments would boost adoption. Still, if the digital currency received is immediately sold back on the market, it’s generating as much demand as it is supply. This simultaneous buy-sell cycle may not significantly contribute to cryptocurrency adoption.
Additionally, it isn’t clear how relevant a business accepting cryptocurrency payments can be for actual adoption, as users are unlikely to go through the process of buying cryptocurrencies if they can just pay in their local fiat currency.
The essence of adoption doesn’t merely reside in the act of acceptance by businesses; it fundamentally lies in the ease of access and willingness of consumers to transition to cryptocurrencies for their transactional needs.
A study by leading research and advisory firm Forrester Consulting revealed that merchants accepting Bitcoin (BTC) attracted new customers and sales.
The study found that cryptocurrency payments bring in up to 40% of new customers for merchants, with crypto customers spending twice as much as those using credit cards.
Speaking to Cointelegraph, BitPay chief marketing officer William Zielke referenced the Forrester Consulting study and said cryptocurrency payment processors give cryptocurrency spenders a fast, easy way to pay for large ticket items and everyday purchases.
Zielke said that during the first half of this year, BitPay saw a 10% uptick in new customer sign-ups compared to the previous year despite the volatile cryptocurrency market. He added that while some brands may already have a technically savvy user base when they start accepting crypto, other merchants may end up introducing new users to crypto:
“Alternatively, merchants like AMC Theatres connect with a broad base of customers who may need to be better-versed in the crypto world. Partnering with big brands like AMC Theatres is an excellent way to boost consumer adoption since it introduces crypto payments for everyday purchases.”
Sankar Krishnan, head of digital assets and fintech at consulting firm Capgemini, told Cointelegraph that money serves “both transactional and savings purposes” and that he would argue that “cryptocurrency captures greater interest from consumers today as they anticipate its value will rise in the future.”
Nevertheless, Krishnan said it’s crucial to acknowledge the risks associated with cryptocurrencies, including their extreme volatility, which means that the mainstream adoption of cryptocurrencies for everyday transactions is “still a work in progress.”
Per Krishnan, when cryptocurrencies “become a more viable option for day-to-day purchases, we can expect more payment providers to embrace and facilitate cryptocurrency transactions.” He added, however, that whether a business keeps the cryptocurrencies it accepts for goods and services or sells them right away “is linked to the company’s treasury strategy.”
According to the Capgemini executive, the price volatility of cryptocurrencies heavily influences this choice, as the market can move in either direction between the firm accepting payment and selling the digital assets, which would only be beneficial if it were actively engaging in crypto trading.
A business accepting cryptocurrency payments and selling the crypto right away, Krishnan said, also “sends a clear message to the market that they do not anticipate the cryptocurrency’s value to appreciate in the future.” Per his words, it’s a “de-risking move” the business makes.
Speaking to Cointelegraph, Justas Paulius, CEO of cryptocurrency payments processor CoinGate, took a balanced approach and said that it can’t be proven whether this buy-sell cycle has “a small, large or no impact at all as there are many factors that need to be considered first, for example, which cryptocurrency is being used, how and where it is being sold, and how much.”
Paulius added that consumers “tend to re-purchase cryptocurrency they’ve spent soon after,” suggesting that when businesses accept cryptocurrency, there’s indeed higher demand. He said, however, that the advantage may be in the generated liquidity:
“Whether the currency is being bought or sold, these actions from both sides create better liquidity in the market and, in a way, balances each other out, also helps determine the true price of a currency at any given moment.”
Businesses accepting cryptocurrency payments may nevertheless boost adoption in other ways, including by simply spreading awareness of their support for cryptocurrencies or specific payment processors that may offer other services.
Cryptocurrency payment processors may allow businesses that do not accept cryptocurrency payments directly to allow consumers to pay with them. Major automobile manufacturer Honda, for example, does not accept crypto payments, but through FCF Pay, people can use Bitcoin and other cryptocurrencies to buy a Honda car.
Paulius noted that awareness spreads as “people see these payment options being introduced by small and large businesses every day,” which signals a growing demand for digital assets. These signals, he said, could see businesses’ competitors become “intrigued and curious.”
He added there’s “little-to-no downside to enabling a crypto payment method,” but instead “brings several tangible benefits” to businesses that do. According to the Forrester Consulting study, accepting crypto does seem to bring in more customers who spend more.
Third-party payment processors, BitPay said, help businesses stay compliant with all local regulations to facilitate accepting cryptocurrency payments while promoting new businesses to the cryptocurrency community as they start accepting crypto payments:
“Leveraging third-party payment processors allows businesses to accept crypto payments without the need to touch or hold crypto, removing the volatility risks. The quick integration times and easy setup make it a simple, fast alternative to using your own wallet. Companies utilizing a processor also escape having to track their costs based on different coins for tax purposes.”
Speaking to Cointelegraph, Gracy Chen, managing director at cryptocurrency exchange Bitget, said that the “e adoption of new things requires extensive user education to establish awareness and trust,” and businesses using third-party payment processors “can play a pivotal role in popularizing cryptocurrencies.”
While third-party payment processors can seemingly be on-ramps for the cryptocurrency space, it’s worth noting that their use dilutes the foundational ethos of cryptocurrencies centered on decentralization and self-sovereignty. Using them also means businesses rely on an external platform to receive crypto payments, which could be hard to change in the future if necessary.
Paulius said that, in some cases, it may be more beneficial for businesses to manage their wallets. These firms, he said, could just use open-source solutions and run their own processors.
The move, however, would come with added risks “such as AML [Anti-Money Laundering] screening or KYC [Know Your Customer] management as you still need to follow the law and adhere to rules. He added:
“Businesses tend to want to accept many cryptocurrencies at once, but only get periodic payouts in a single currency like U.S. dollars or euros to a bank account, which would be challenging to set up by yourself.”
Paulius noted that businesses also want easy integrations, transaction notifications, and the ability to refund customers and accept payments on various networks, all of which are facilitated by payment processors.
While there are costs associated with integrating cryptocurrency payments with third-party payment processors, Paulius concluded, they are “still less expensive than processing card payments.”
While accepting cryptocurrency payments may be challenging for most businesses, what to do with the received amounts may prove just as difficult. Most companies accepting crypto payments convert the funds immediately, but what if they didn’t?
Even if businesses accept cryptocurrency payments — via their own solutions or third-party payment processors — one question remains: why would consumers choose to pay with cryptocurrencies over their local fiat currency, especially if they don’t previously own crypto?
Paulius said that in some cases, banking is not an option, and cryptocurrencies could be a much-needed solution. Refugees or people stuck in dire situations in countries foreign to them or where the financial system isn’t functioning could rely on a decentralized network for their payments.
While Paulius conceded that “it is not common for consumers to buy cryptocurrencies just to use them for retail payments,” it noted it’s “likely in several cases,” as some people value their privacy greatly.
“Many of those people use cryptocurrencies for buying VPNs, hosting solutions, proxies and similar services just because they can remain pseudonymous and disclose less or none of their personal information to fewer third parties.”
Cryptocurrencies, Paulius concluded, can also be a faster way to make transactions. Speaking to Cointelegraph, Ilya Volkov, CEO and co-founder of YouHodler, said that in the city of Lugano, Switzerland, BTC and Tether (USDT) can easily be used in various shops and restaurants via the same point-of-sale terminals used for traditional card payments.
Per Volkov, some startups are working on ways to use these terminals to let users pay directly from their MetaMask wallets.
Companies can provide a way for consumers to use cryptocurrencies, making these digital assets more familiar and useful. Additionally, third-party processors make it easier and less intimidating for businesses to start accepting cryptocurrencies, which might encourage other companies to do the same, seeing the growing interest.
The path to mainstream adoption is more complex, however, as what is done with the cryptocurrency and whether consumers even choose to pay in crypto play a pivotal role.
While more sophisticated and tech-savvy consumers will likely use cryptocurrency payments to protect their privacy, cryptocurrencies could also provide a lifeline in more extreme scenarios. Whether they’ll be accepted as a payment method when showtime comes remains to be seen.
Mainstream commerce and big brands are reporting improved business results and promising loyalty programmes through integrations with the wider Solana ecosystem.
Web3 tools powered by layer-1 blockchain Solana are driving tangible returns and delivering deep customer data insights, according to prominent mainstream brands and companies that attended Solana Breakpoint.
The four day conference hosted in Amsterdam in 2023 attracted a wide variety of businesses and projects from Web2, Web3 and traditional backgrounds. A prominent takeaway was adoption of Solana-based tools and services innovating payments and loyalty programmes.
Boba Guys, a growing United States-based bubble tea brand in the mold of Starbucks, unpacked how its pilot programme for a new customer loyalty app delivered insightful data while seemingly incentivizing customers to return to its stores in San Francisco.
Related: Visa taps into Solana to widen USDC payment capability
The five week programme relied solely on in-store promotion to customers in the area. 600 users were onboarded, with 31% of orders being attributed to the loyalty programme after the fact. Co-founder Bin Chen and Andrew Chau also reported that the app resulted ina 67% increase in monthly visits of loyalty programme users and a 65% increase in spend.
Solana Foundations head of commerce business development Josh Fried tells Cointelegraph that the development of the loyalty programme provides a tangible use case for commercial clients looking for Web3, blockchain based tools to build their businesses and customer base.
“The Boba Guys pilot initial data shows that we’re actually improving their business results. A real retailer with 25 locations got on stage and said this Solana-based programme was bringing a return of investment of 800%,” Fried explained.
For every $1 that Boba Guys puts into the programme, the company is seeing $9 revenue in return. It’s a “legitimate business uplift”, Fried said, with the company planning to roll out the app across its stores in San Francisco, New York and Los Angeles.
The recent integration of Solana Pay into e-commerce platform Shopify is another indicator that Web3 based payment tools are becoming a viable alternative for conventional businesses. Fried unpacked how merchants are beginning to provide meaningful feedback on the adoption of its payments rail.
The MadLab NFT project noted a material uplift in sales from crypto native users that were holding crypto. “These users were holding USDC on Solana, waiting for the utility to use it to pay for something rather than just trading. The community used the integration to start buying merch," Fried said.
Another anecdote came from an entrepreneur based in Denver, Colorado, who has turned to Shopify’s Solana Pay integration to drive sales of bespoke fragrances. The attraction to the payment solution is the ability of Web3 to help drive e-commerce sales:
“When you're buying e-commerce, you can't smell something. Right. He's like, ‘for a storyteller, I need metaverses, I need Web3 technology that's going to bring new layers to the sale’.”
While optimistic, Fried concedes that there is a significant amount of work to drive adoption of Solana Pay and Web3 tools built on Solana. Having worked at Google for a decade on the development of Google Pay, he highlights that event the tech behemoth took years to see adoption of its increasingly ubiquitous payment service.
“What helps is when somebody like Visa comes along and says, hey, we're going to start doing interbank settlement on the Solana blockchain,” Fried explains. Major payment processors and payment rails will be crucial in driving Web3-based payments adoption.
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Web3 business models based around NFTs, blockchain and crypto have slowly been gaining ground in the mainstream, to mixed success.
Web3 has been gaining ground in mainstream industries with the rise of Web3 business models based around nonfungible tokens (NFTs), blockchain technology and crypto. But it’s still an open question whether it’s actually improving mainstream industry and products.
According to a June Coinbase study, over half of the top 100 United States companies listed in the Fortune 500 have pursued Web3 initiatives since the start of 2020.
Around 60% have either been in the pre-launch stage or already launched since the start of 2020. Out of the surveyed Fortune 500 executives who are familiar with blockchain, 83% say their companies have either current initiatives or are planning them.
Speaking to Cointelegraph, Pat White, co-founder and CEO of digital asset platform Bitwave, believes there has been progress in successfully marrying Web3 with the mainstream.
“It has the potential to drive innovation across so many industries — and we’re just starting to see some of the early use cases outside of the crypto economy,” he said.
He cites eliminating intermediaries, reducing costs, improving data integrity, supply chain transparency, enhancing cybersecurity and creating new ways of interacting with customers as particularly useful in sectors like finance and healthcare, among others.
Related: How smart contracts can improve efficiency in healthcare
Healthcare already has some promising use cases for Web3 in these areas, including services that now appear in the metaverse, specifically for those seeking mental healthcare.
Some companies are also experimenting with medical records being stored and managed using blockchain. One company even released a COVID-19 medical certificate on the blockchain.
It’s all still in the early stages of research, though, and it remains to be seen whether Web3 in healthcare will be more effective than systems already in place.
More than a few high-profile companies in the mainstream have started to use Web3. For example, Starbucks has rolled out an NFT-based rewards program.
Goldman Sachs and Microsoft have been developing new blockchain networks aimed at financial institutions as well. Elon Musk has also been teasing a crypto payment option on X (formerly Twitter) for some time.
White believes that while there are use cases for Web3 in mainstream industries, that doesn’t mean everyone can immediately drive efficiency with Web3 tools.
Earlier in 2023, high-performance sports car manufacturer Porsche found this out the hard way with the failure of its NFT project, which it had to halt abruptly after backlash over high minting prices and the lack of utility.
Our holders have spoken. We’re going to cut our supply and stop the mint to move forward with creating the best experience for an exclusive community. More info in the next hours.
— PORSCHΞ (@eth_porsche) January 24, 2023
“Organizations can get into deep water quickly when they try to leverage only their existing legacy tools and processes for managing digital assets. New technologies require new ways of operating,” White said.
“With the recent downturn, we’ve actually seen companies that aren’t sustainable moving out of the Web3 space.”
White says using Web3 tech shouldn’t be taken lightly, and any foray into the space should be “a strategic decision” orchestrated across every operational department.
At the moment, he sees Web3 at a similar stage of development to the internet in the late 90s. Speculation is rife, and many companies are looking to incorporate the new tech without a plan.
“The nature of innovation cycles is that during hype cycle periods, a lot of people will try the tech for a lot of purposes, and some may not actually be helped by the innovation,” White said.
Brendan McKittrick, founder and chairman of decentralized aviation platform Aerobloc, told Cointelegraph he thinks Web3 holds the promise of enhancing everyday products and services in areas such as supply chain transparency and data security.
The extent of this improvement depends on how effectively Web3 is implemented. McKittrick says there have been hurdles and challenges for mainstream companies using Web3, just like any new tech.
“Some mainstream businesses may adopt Web3 to ride the hype and attract investors, potentially resulting in superficial integration that fails to deliver significant benefits,” McKittrick said.
“These missteps can be valuable learning experiences, helping industries refine their approach and maximize the benefits of Web3 in the long run.”
In some cases, adopting the tech is out of the company’s hands, as with French gaming giant Ubisoft, who had to cool on plans to use NFTs and blockchain after player backlash.
Related: Ubisoft launches Ubisoft Quartz platform for playable and energy-efficient NFTs
Overall, McKittrick believes Web3 isn’t just about tech; it’s a mindset that includes decentralization, trust and rethinking ownership — all of which could benefit the mainstream industry.
However, he believes that in some cases, the systems already in place might be more effective, and while Web3 holds “significant potential for a wide range of applications,” its suitability “depends on the specific needs and characteristics of each industry.”
“Its universality is tempered by the need for careful consideration of each industry’s unique requirements and constraints,” McKittrick said.
“Some sectors may not benefit as much from decentralization or blockchain technology, and traditional systems might still be more cost-effective and efficient for them,” he added.
Kadan Stadelmann, chief technology officer of blockchain platform Komodo, told Cointelegraph that, in his opinion, Web3 tech is already improving products in mainstream industries such as music, gaming and real estate.
Related: Web3 is transforming the music industry — Here’s how
On the music scene, he says Web3 tech helps artists eliminate intermediaries, such as record labels and streaming services, allowing artists to connect with their audience directly.
“Web3-minded musicians retain control over their creative works, helping to ensure fair compensation for their efforts because decentralized music platforms provide transparent royalty systems,” Stadelmann said.
“Artists receive instant payments for their streams or downloads without delays or complex contracts with flaky independent labels or overbearing major labels.”
Web3 tech has been very active on the music scene, from democratizing song rights royalties and blockchain licensing to legacy companies like Sony Entertainment filing patents for NFT-authenticated music.
Artists have also begun exploring new ways of driving fan engagement using wallet-based loyalty incentives and token-based communities. Earlier in 2023, Harry Styles fans opened a crypto wallet through a third-party app.
Empowering true ownership for music fans.
— Polygon (Labs) (@0xPolygonLabs) June 26, 2023
Innovative teams like @tryevntz are plugging in & delivering personalized fan-first experiences — fueled by @usecocreate flexible APIs.
Starting with @Harry_Styles https://t.co/q5AeHF8FCU
In gaming, Stadelmann says a central authority can’t control platforms powered by Web3; instead, they operate on decentralized networks such as blockchain.
“This shift toward decentralization has numerous implications for gamers; it enhances ownership and control over in-game assets,” he said.
“Players can truly own their virtual possessions and even trade them with others in a secure and transparent manner,” Stadelmann added.
For the real estate industry, Stadelmann said Web3 can offer a framework allowing peer-to-peer transactions and smart contracts without intermediaries. Tokenization also allows properties to be divided into digital tokens representing ownership shares.
“This enables fractional ownership and opens up real estate investments to a wider range of individuals who may not have had access before,” Stadelmann said.
“Transparency and immutability in property transactions reduces fraud and increases trust among parties involved. Web3 also empowers individuals to monetize their properties through decentralized finance platforms,” he added.
Stadelmann believes the fashion industry has benefited from an injection of Web3 tech as well, with the ability to direct peer-to-peer interactions between designers and consumers.
He says designers can protect their intellectual property rights and receive compensation for their creations through smart contracts, authenticating products and combating counterfeiting.
“Unique digital identities can be assigned to each garment, allowing consumers to verify its authenticity with a simple scan,” Stadelmann said.
“This not only protects brands from revenue loss but also ensures consumer confidence in their purchases,” he added.
Speaking to Cointelegraph, Bradley Allgood, CEO and co-founder of Fintech company Fluent Finance, said he thinks Web3 tech does have the potential for use in the mainstream finance world.
However, he says the on-chain and legacy worlds need to come to a consensus on a trusted gold standard medium of exchange that can flow frictionlessly between on-chain and traditional financial ecosystems.
“Until then, it will be more of the same gimmicky adoption efforts and marketing hype,” he said.
“It’s just like every other technology based on value: it needs a sound medium of exchange and financial infrastructure in order to support commercial applications,” Allgood added.
Related: Web3 gaming still a long way from mainstream adoption: Survey
At the moment, Allgood says in his experience, Web3 integration processes can be clunky and inefficient and create inferior user experiences because the middleware and interoperability infrastructure isn’t there just yet.
There have been attempts to marry Web3 and blockchain in finance already. Major payment processor PayPal announced its PYUSD stablecoin, and payment giant Mastercard is exploring crypto benefits through a new collaboration with crypto payment platform MoonPay.
Allgood believes until there is robust custodianship and issuance of a stable-valued asset with adequate, real-time transparency in place, Web3 in the mainstream will continue to be held back.
Payments giant PayPal says that it has received a subpoena from the U.S. Securities and Exchange Commission (SEC) over its new stablecoin. In a new document, PayPal says that the regulatory agency has issued a subpoena over PYUSD, the firm’s dollar-backed stablecoin which launched earlier this year. “On November 1, 2023, we received a subpoena […]
The post PayPal Says It Has Received a Subpoena From the SEC Over the PYUSD Stablecoin appeared first on The Daily Hodl.
Crypto remittances are a lifeline for many people who need to send money to their loved ones, as they provide faster, cheaper and more transparent transactions than traditional methods.
As the cryptocurrency market moves sideways and amid a deepening stablecoin exodus, the sector remains a vital lifeline for many sending money to loved ones while dodging extremely high fees that can be life-changing over time.
Cryptocurrency remittances have been seeing their adoption grow, and the low volatility seen in the space over the last few months might just be the silver lining that encourages more people to transition from mere spectators to active users, harnessing the true potential of this financial avenue.
Compared to traditional methods, crypto remittances sport numerous advantages, which include faster processing time, lower transaction costs and more transparency. Speaking to Cointelegraph, Brendan Berry, Ripple’s head of payments products, noted that for both fiat and crypto, the basic tenets of payment success are “speed, low-cost settlement, security and reliability.”
Berry noted that from a macro perspective, existing domestic payment rails work “relatively well” but face difficulties when cross-border payments are made. Berry added:
“There is no third party or global central bank, so the world has created this complex system of correspondent banking that is costly, error-prone, slow and leaves trillions of dollars in locked-up capital.”
He said that remittances have become a lifeline for millions worldwide and can be greatly improved through new technologies like crypto and blockchain. According to World Bank data, remittances grew 5% in 2022 to reach $682 billion.
Berry added that the high cost of remittances — ranging from 5% to 7% worldwide — and their slow speeds burden millions of families. He stated that the global economy “may seem like an always-online global marketplace, but traditional finance still operates on a 9 to 5, Monday to Friday, schedule.”
The World Bank estimates the global average cost of sending $200 is 6.5% — a massive amount of money for families living on $200 or less a month.
Speaking to Cointelegraph, a Coinbase spokesperson said that whether consumers use banks, money transfer operators or post offices, the impact of fees on their remittance payments is enormous, ranging from 10.8% with banks to 5.5% with post offices.
The spokesperson added that the U.S. average fee rate is 6.18%, which means that every year, Americans, on average, spend “close to $12 billion on remittance fees.” They added:
“Cryptocurrencies like Bitcoin or Ether can greatly cut the cost of sending money internationally by about 96.7% vs. the current system. Sending Bitcoin to another wallet costs an average of $1.50 per transaction, and Ether costs an average of $0.75 per transaction.”
It’s worth pointing out, however, that security concerns associated with custodying cryptocurrencies remain a deterrent for many to enter the space, as managing the private keys to a cryptocurrency wallet can be a challenge, especially to those less tech-savvy. On top of that, the consumer protections offered by the traditional financial system may leave some at ease despite the high fees.
Coinbase added that the time cost is also significant, with the average remittance taking between one and 10 days to settle, while cryptocurrency transactions take on average just 10 minutes.
Adding to this, a spokesperson for Circle — the firm behind the USD Coin (USDC) stablecoin — told Cointelegraph that a key feature of blockchain-powered remittances is “accessibility and inclusivity, requiring only a phone and internet connection to transfer funds across borders and at low-cost.”
Moreover, Lesley Chavkin, head of policy at the Stellar Development Foundation, a nonprofit organization supporting the Stellar network, told Cointelegraph that for remittances sent on a blockchain, preliminary data from “a small, limited-scope pilot focused on the United States to Colombia payment corridor” showed fees were half of those paid for traditional remittances.
Recent: From payments to DeFi: A closer look at the evolving stablecoin ecosystem
As transactions on the network scale up, Chavkin said, remittance fees could drop even more, furthering their advantages. Pavel Matveev, the co-founder and CEO of Wirex, told Cointelegraph that these don’t have to navigate through numerous intermediaries.
Despite their advantages, cryptocurrency remittances aren’t as widespread as one may think. For one, ease of use isn’t at the point of mass adoption, while the cryptocurrency market’s volatility keeps many on the sidelines.
Ripple’s Berry said that accessibility and user-friendliness are “critical components for the mainstream adoption of crypto remittances.”
User experience, he said, has been a problem for the industry but is arguably the easiest one to solve. He added that legacy payment solutions may appear to be more user-friendly with the use of modern interfaces “that marginally improve the customer experience, which creates the illusion of advancement,” while in reality, there has “been little improvement to the foundational infrastructure that underpins our global financial system which would ultimately unlock true progress and by extension the user experience.”
Nevertheless, Brendan conceded that while cryptocurrencies can be faster and cheaper for sending funds, a “successful remittance solution must also help the customer off-ramp funds in the currency of their choice.” He added:
“The ability for users to transfer value from fiat to crypto or vice versa has historically been a challenge at both the individual and enterprise levels. While individual users have more options than ever before through more than 600 crypto exchanges globally, enterprise-grade off-ramp solutions are sparse.”
Indeed, one has to consider the costs associated with existing cryptocurrency infrastructure and how it interacts with the traditional financial system. While receiving a cryptocurrency transaction may be fast and cheap, paying with crypto isn’t as easy.
Commenting on the situation for Cointelegraph, Gero Piskov, card and payments manager at digital wealth platform Yield App, said that in “regions where crypto remittances thrive, accessibility and UX [user experience] have indeed been hurdles, which have hindered broader adoption.”
Often, the solution involves converting cryptocurrencies into fiat currency, which may incur additional transactions, trading fees and potential withdrawal fees. Converting to fiat currency, however, may be a bigger challenge than it should be, especially in regions where crypto-to-fiat liquidity isn’t significant enough to not add more complexity to the process.
Speaking to Cointelegraph, a Binance spokesperson said that the World Bank’s Global Findex 2021 shows 42% of adults in Latin America and the Caribbean still lack access to a bank account, with the segment representing 24% of the total adult population.
Cryptocurrency solutions, the spokesperson said, have the “potential to fill this gap while also reducing the financial transaction’s time and costs for people who already participate in the traditional system.”
In countries where paying with crypto with one solution or another is possible, users may be exposed to heightened spread they may not be aware of, as well as crypto market volatility. This volatility can completely nullify the advantages of paying less for the transaction itself.
Binance’s spokesperson added that the main goal of blockchain and cryptocurrencies is to simplify the entire process for users; hence, industry players are “dedicating significant efforts and resources into innovating and enhancing its platform with the users’ experience in mind.”
However, they noted that given the nascency of blockchain technology, there are still people without the technical know-how to process crypto transactions efficiently. The spokesperson said:
“One solution that has emerged would be liquidity services on particular blockchains. These international crypto liquidity service providers facilitate the transfer of money from one country to another, with cryptocurrencies acting as a bridge.”
In these blockchain-based liquidity services, Binance’s spokesperson clarified, a sender would transfer money in their own local currency, while the recipient would receive it in their local currency. Such a service would make the process friction and almost instantaneous for users across all backgrounds, they said.
Simplifying remittances and greatly reducing their cost is extremely important, especially for people losing between 5% and 10% of the money they need to survive on fees. This means that remittances have actually become a use case for digital assets, as noted by a Circle representative who spoke to Cointelegraph and added that crypto is expanding access to financial services across the globe.
Binance’s spokesperson seemingly corroborated the words from Circle, saying that remittances are “the primary economic lifeline for millions of families worldwide, and a major driver of economic growth for developing countries, totaling $589 billion in 2021,” according to World Bank data.
Cryptocurrencies are improving the lives of people relying on remittances, according to experts Cointelegraph spoke to, thanks to the numerous advantages being offered. One example the Stellar Development Foundation’s Chavkin pointed to us is Félix.
Félix is a Whatsapp-based payments platform in Latin America that allows users to send money through an AI chatbot on Meta’s popular messaging platform. According to the platform’s co-founder and CEO Manuel Godoy, Félix uses USDC on the Stellar network to boil the process of remittances down to “seconds.”
Chavkin noted that the figure showing remittance payments grew by about 5% in 2022 “represents only recorded transactions; the true number is most likely significantly higher.” She concluded:
“Providing solutions that are faster, cheaper and more accessible is one tool to help reduce poverty and improve outcomes. Focusing on crypto remittances as a solution is critical to serving these populations.”
Wirex CEO Matveev told Cointelegraph that more may be coming in the near future as technology evolves and collaborations with traditional financial institutions are expected to, along with regulatory developments, make cryptocurrency remittances “even more widely accepted and efficient.”
The costs associated with reentering the fiat currency system may nevertheless hinder the advantages of cryptocurrency remittances. Conversion costs, according to Ripple’s Berry, may not necessarily impact remitters as various companies who support crypto-enabled payments have protections to avoid exposing users to volatility. Blockchain-based transactions, on the other hand, don’t.
Berry noted that forex transactions are also susceptible to volatility, with smaller fiat currencies being more volatile. The cryptocurrency space is nevertheless well-known for its volatility, which could keep some remitters on the traditional financial system, deciding that the fees are less problematic than the volatility and the challenges associated with using cryptocurrency for payments.
On top of that, the uncertain regulatory environment surrounding cryptocurrencies in various jurisdictions only further complicates their adoption as remittance solutions.
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Cryptocurrency remittances are effectively revolutionizing the way individuals across the globe who can rely on them exchange value, offering unprecedented advantages over traditional systems, with the crypto realm standing as a beacon of development for those currently losing part of their money to the high fees of a decades-old system.
While challenges persist, especially in terms of user experience and widespread adoption, a future in which cryptocurrency remittances do even more to alleviate poverty likely awaits, adding a new use case to an asset class already helping millions preserve value.
Cryptocurrency education and awareness, however, still has a long way to go to help crypto remittances become a viable long-term solution, as specialized knowledge is necessary to safely use these assets regularly.
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