For Retail: Cryptos Today, Digital Dollars Tomorrow?


For bitcoin – indeed for cryptocurrencies in general – scale is the name of the game. Not just for trading, of course, where price spikes (and slips) are a hallmark of speculation that is still rampant, but where the scale could, conceivably, lead to more rational price discovery.

Scalability is key in an effort to make cryptography more prevalent in the overall commerce ecosystem.

To get an idea of ​​how volatile the swings are: bitcoin, that cryptocurrency name, is trading at around $ 12,900, offered by holders in anticipation that bitcoin could be on its way to the masses.

This sentiment was partly spurred by news last week that PayPal would allow customers to buy, hold and sell cryptocurrencies directly from PayPal accounts.

Cryptocurrencies – including bitcoin, Ethereum, Bitcoin Cash, and Litecoin – can be used to transact with 26 million merchants across the company’s network as of early next year.

PayPal is also reportedly considering buying cryptocurrency companies – which would be plural – as reported on Friday (Oct 23) by Bloomberg. The newswire cited unnamed sources “familiar with the matter”.

As things stand, according to the PayPal site, consumers will be able to instantly convert the balance of the selected cryptocurrency into fiat currency.

Having fiat on both sides of the transaction speaks volumes about some of the challenges surrounding a more mainstream adoption of cryptocurrencies, at least so far.

And that’s … volatility.

Swings can work to the advantage and disadvantage of holders as cryptocurrencies such as bitcoin are converted to fiat (with the associated gains or losses in conversion).

But interestingly in what a long-term perspective might suggest, CEO Dan Schulman said last week that PayPal is “eager to work with central banks and regulators around the world to offer our support and to significantly contribute to shaping the role that digital currencies will play in the future of global finance and trade. “

There may be a ripple effect, where using PayPal’s crypto integration can give consumers the familiarity of feeling encouraged to try other wallets or platforms.

There are several routes to get there, to that level of comfort with everyday use. Obviously, along one path: The Fed said it is partnering with MIT to explore the infrastructure that could underpin digital currencies, and in particular, the digital dollar.

An important stepping stone to making digital coinage more widely available came late last month, when the Office of the Comptroller of the Currency (OCC) said that national banks and federal savings associations hold reserves on behalf of customers who issue stablecoins. The ruling only applies to cryptocurrency on a one-to-one basis from a single fiat currency.

It’s another piece of the regulatory puzzle that had been put at the center of attention for cryptocurrencies, for stablecoins. But there are still gaps.

In a nod to how volatile the regulatory environment is, CNBC reported last week that Ripple, the company behind the cryptocurrency XRP, is considering moving its headquarters from the US to London, reportedly due to “frustration with the US regulatory environment “. At the heart of this contention is the fact that on the other side of the pond, the Financial Conduct Authority is not saying that XRP is a stock, but it can be used as a currency. (Here in the US, the US Securities and Exchange Commission has said that bitcoin and Ethereum are not securities and therefore do not need to be regulated in the same way.)

Beyond volatility

As Jeremy Allaire, CEO of financial technology firm Circle, told Karen Webster that stablecoins and other crypto assets are preparing to cement their respective places as payment tools through P2P, C2B, and B2B commerce.

“The biggest problem was that they are highly volatile and still are,” Allaire told Webster, “because they are more like commodities that people are trading.”

But as Allaire noted, we are approaching an era that will see money programmability. Peer-to-peer (P2P) transactions require only digital wallets and a direct means of communication to transact.

It is worth noting that PayPal left the Libra project just over a year ago and was the first member to leave the Facebook-backed Libra Association. As for Libra, betting that a private company (or in this case a consortium of private companies) will upset the financial system by itself, with a single digital offering, can be a somewhat risky proposition.

But betting on endpoints and binaries to facilitate such transactions may be a more sustainable strategy, as we move beyond bitcoin, ultimately, to ubiquitous offerings like digital dollars.



The How We Shop report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research is based on a series of studies conducted since March, which examined over 16,000 consumers on how their shopping habits and payment preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their growing appetite for online commerce and touchless digital methods, such as QR codes, contactless cards, and digital wallets, is poised to shape the post-pandemic economy.

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