Cryptocurrency payments haven’t garnered as much media attention as NFTs or DeFi – until now. As major players like MasterCard and AMC expand their crypto support and more governments consider making crypto legal tender, leading processing companies such as CoinsPaid are reporting record increases in transaction volumes.
Hold, spend, or convert into fiat: the choice facing crypto users
Satoshi Nakamoto’s original Bitcoin White Paper is entitled ‘A Peer-to-Peer Electronic Cash System’, showing that he clearly meant Bitcoin to become a means of payment. Instead, it evolved into the most profitable investment asset of the generation, appreciating from below 1 cent to $68,000 in eleven years.
Many other cryptocurrencies have since generated immense gains for patient long-term holders. For example, it’s been calculated that someone who had invested $1,000 in Shiba Inu on January 1, 2021, would now be a multimillionaire.
However, as the price of a coin or token grows, holders are faced with a tough choice: should they sell and enjoy the profits or keep waiting for even more gains? Selling crypto for cash can be a multi-step process and involve high fees, especially if one needs to cash out cryptos from outside of the top 20.
Crypto payments are a partial solution to this issue. Instead of converting digital currency into fiat, one can pay for goods and services directly with crypto when its USD exchange rate is high – and keep holding when the price dips. This way users can avoid high crypto-fiat conversion fees and save a lot of time.
Over 18,000 businesses worldwide already accept Bitcoin and other digital currencies. Still, it’s a tiny number compared to the 20 million merchants that accept PayPal. In order to achieve wider adoption, crypto payments need to be supported by global companies and payment providers. And judging by the recent stream of news on the subject, Q4 2021 and especially 2022 could be decisive in this regard.
Brazil might become the second country to accept Bitcoin as legal payment
El Salvador’s decision to make Bitcoin legal tender was a great marketing win for this small Latin American country, but it will only have a real impact on the crypto industry if bigger countries follow suit.
Luizão Goulart, a member of Brazil’s Congress, recently filed a proposal to approve crypto as a way to pay salaries to both public employees and regular workers. This is not the same as becoming legal tender: after all, some top-level executives take a part of their remuneration in stocks and other assets, which doesn’t mean you can pay with stocks at a grocery store.
Still, if workers receive salaries in crypto, they will be motivated to spend that crypto in shops, both online and offline. In turn, this will encourage more Brazilian businesses to support the digital currency as one of their payment options. The total number of crypto-friendly companies could increase by thousands.
AMC might accept SHIB together with DOGE
In early October, America’s largest movie theater chain AMC announced it would start accepting BTC, DOGE, ETH, and LTC as payment for tickets and gift cards. Now it is also looking into Shiba Inu (SHIB), a meme coin that appreciated by a factor of 10 between September and late October.
Once again, it’s important to distinguish between the marketing value of the move and its real impact on crypto adoption. AMC decided to accept DOGE after repeated requests on Twitter by the army of Dogecoin fans, but DOGE is indeed a good coin for everyday payments. It runs on its own blockchain that is much faster than Bitcoin, and a single transaction costs around $0.7. For comparison: the average transaction fee is $3.7 on the Bitcoin blockchain and a whopping $50 for Ethereum.
The size of a blockchain miner fee doesn’t depend on the transaction size. How many AMC moviegoers would pay for a $13 ticket with ETH, if it means paying $50 in fees? Not many. And since SHIB is a token running on the Ethereum blockchain, the transaction fee is just as high for SHIB as it is for ETH.
On a certain level, it does make sense to accept SHIB, since many early buyers have made immense profits on the token and would want to spend them. But for mass adoption to come faster, companies should turn their attention to coins with low fees and faster processing times, such as Solana (SOL), Avalanche (AVAX), XRP, Stellar (XLM), etc. Ironically, crypto payments may only come into their own once the industry moves away from BTC and ETH as a means of payment.
CoinsPaid reports a 400% increase in monthly payment volume since January, +126% in October alone
The best way to evaluate the actual spread of crypto payments is by the volume and number of transactions processed by the largest gateways. Unfortunately, these numbers can be hard to come by, since most providers don’t release their data. An exception is CoinsPaid, one of the fastest-growing crypto payment networks in the world that serves over 800 merchants.
CoinsPaid’s payment volume grew by 126% on October month-on-month to reach a record 712 million euro. This is up 400% compared to January 2021. Meanwhile, the absolute number of transactions processed in October is 313% higher than in January.
The company has also reported a record increase in the number of merchants served: from 300 at the end of 2020 it has reached 800. In other words, more businesses joined the CoinsPaid gateway this year than in all the previous years of its operation. What is behind such a surge of interest?
According to CEO Max Krupyshev, merchants see crypto as an attractive alternative to card payments. The average processing fee starts from 0,8%, as opposed to the 3-5% charged by banks for acquiring services. There are no chargebacks and no rolling reserve requirements, and the payment acceptance rate is close to 100%. The benefits are even more significant for businesses in the markets considered high-risk, such as gaming.
Moreover, leading providers, including CoinsPaid, support fiat settlements: merchants can convert crypto revenue into fiat (USD, euro, etc.) and withdraw it directly to a bank account. This means that entrepreneurs don’t have to handle crypto outside of the gateway platform unless they wish.
CoinsPaid’s success was recognized at the AIBC Summit earlier in 2021, where it was named Payment Provider of the Year; in November, the company was nominated again in the same category by the organizers of the AIBC Summit in Dubai. The very existence of this award category demonstrates that crypto payments are an important part of the emerging tech field – even if they don’t get as much attention as blockchain interoperability solutions, for example.
MasterCard launches crypto-friendly cards in the Asia Pacific
So far we’ve been talking about merchants accepting crypto through specialized gateways, such as CoinsPaid and BitPay. Another approach to the issue of using crypto in daily life is crypto cards: bank cards linked to the user’s cryptocurrency balance in a wallet or an exchange.
In this scenario, whenever a user initiates a purchase in USD or another fiat currency, the equivalent amount of crypto is converted into fiat to pay the merchant. This allows users to pay with crypto, even if the merchant doesn’t accept it yet.
Crypto.com and Binance Visa cards are already very popular with European users. Now it’s time for the Asia Pacific region – and here MasterCard seems to hold early leadership.
MasterCard announced that it has partnered up with Bitkub, CoinJar, and Amber Group to offer pre-paid crypto cards to users in the region. These cards can be used anywhere where MasterCard is accepted, i.e. not only in Asia.
Blockchain enthusiasts believe that in a few years, everyone will switch from the ‘outdated’ payment methods like cards and PayPal to crypto. However, the real future of our everyday payments is probably hybrid, with cryptocurrency, pre-paid crypto cards, and legacy options like PayPal used interchangeably, perhaps from a single payment hub on a smartphone. 2022 will reveal a lot about what this future will look like – and just as importantly, which cryptocurrencies will become the payment standard in the coming years.