The New Mathematics of Crypto Payments

There is a fundamental difference between paying with crypto and paying in crypto which will play an important role in the usage of bitcoin, ether and others at checkout and payment screen.

Right now, on the whole, people are paying with crypto but thinking in dollars – for example using a crypto debit card at the point of sale. This works well if you are a crypto investor who wants to be able to use it without having to worry about going to an exchange and turning some of your bitcoin holdings into cash.

Change not so foreign

It’s not a big deal when you’re buying a couch or a car, but it’s unreasonably inconvenient for a cup of coffee or a dinner out. And that basically assumes that most or at least a significant portion of your disposable income is kept in crypto. Which in turn assumes that you are a serious crypto investor who thinks your bitcoin, ether, dogecoin, XRP or whatever will increase in value so much over the long term that you want to keep all or at least a large portion of it. your wealth in crypto.

Or that your salary be in crypto – something several companies, like the Coinbase exchange, are trying to make easier for employers.

But paying with crypto isn’t really a revolution, it’s more like a debit card tapping into a money market account. And that’s not really practical, especially with cryptocurrencies that regularly fluctuate by 5% or 10% or more on a daily to weekly basis – and rise or fall by 50% or more over several months.

A good way to think about it is to consider paying for things as a tourist in a foreign country. Not in the euro zone, where 1 euro is currently worth 1.01 dollars, but somewhere where 27, 3,872 or 680,000 of the local currency are worth 1 dollar. When you’re in this situation, you typically spend several days doing FX conversions in your head or asking Siri every time you buy something. Eventually you get it, but crypto fluctuations can make it a tour group visiting a new country every few days.

Pay in Crypto?

Is it worth going through the process of accepting crypto as a merchant? Sure. An increasing number of people want this ability and will look for merchants who provide it.

See also: PYMNTS Data Shows Crypto Use for In-Store Purchases is Growing

According to PYMNTS’ study The US Crypto Consumer, Cryptocurrency Use In Online and In-Store Purchases, 27% of consumers with crypto say they “probably” or “definitely” prefer to shop at merchants that accept crypto .

But for crypto to do what Bitcoin creator Satoshi Nakamoto wanted — to make cryptocurrencies a replacement for day-to-day national currencies — it’s far from it.

Think in crypto

For people, paying in cryptocurrency basically means thinking about it.

“There is a cognitive shift that needs to happen,” Kevin Beauregard, CEO of blockchain game studio Atmos Labs, recently told PYMNTS. “People have to think in a different currency. Most people in the real world think, “I work for a job, my salary is paid in dollars, and I expect to accumulate more dollars over time.”

This has changed in one place, he believes: non-fungible tokens (NFTs).

The original NFT markets all priced and sold NFTs in ether – ETH – and early collectors, who tend to be hardcore crypto users, are now thinking about ETH, Beauregard said.

“They’re basically saying, ‘I acquired this NFT for so many ETH and I can sell it for how many ETH,'” he said. “They are actually thinking about ETH now.”

It’s something he never would have thought possible five years ago.

However, his argument was that dollar-pegged stablecoins remove the need for this cognitive shift. “Getting to a fundamental unit of account that people understand is an important thing,” he added.

This was one of the main reasons why central bankers, treasury departments and international financial institutions blew up so hard and Facebook’s Libra project – it was a stablecoin pegged to a basket of currencies but not a alone, like the dollar. By enabling 2.3 billion users to instantly think and pay with pounds, the project would cause them to stop thinking in their own currency, diminishing its control and authority. This is why many weak currency countries are not happy when people “dollarize” their purchases.

While opponents of stablecoins worry that privately controlled cryptocurrencies will harm central banks’ ability to influence the economy, the removal of the national currency as a denominator or commodity goes one step further.

But it is a very big step.

And paying with a dollar-pegged stablecoin (in the US) offers some conveniences on the back-end, like instant settlement and cross-border payments, but as many stablecoin opponents have pointed out recently, FedNow and The Clearing House have that first part covered, or soon will, and cross-border payments aren’t an everyday need for most individual consumers.

The usefulness of stablecoins – outside of the crypto trading and DeFi worlds – at this point is largely to facilitate payments for crypto owners rather than deciding whether they want to spend 0.00045 BTC.

New PYMNTS study: The integration of digital banking

A PYMNTS survey of 2,124 US consumers shows that while two-thirds of consumers have used FinTechs for some aspect of banking, only 9.3% call them their primary bank.

We are always looking for partnership opportunities with innovators and disruptors.

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