The Future Of Crypto Payments - Are Stablecoins Necessary?

A Debatable Topic

This has been the subject of many a debate ever since the Bitcoin boom in 2017. However, a lot has changed since then. Most notable is the acceleration and adoption of stablecoins. When you take a look at the Top 10 on CoinGecko or CoinMarketCap, you will find that stablecoins are quite prevalent. In fact, at the time of writing, 30% of the Top 10 Cryptocurrencies are indeed stablecoins.

If stablecoins were to be the primary means of payment, one of the most common arguments against Crypto as a payment method would ultimately become irrelevant. It is often argued that Crypto is way too volatile to be used as a means of payment. Strangely enough, fiat currencies have been anything but stable of late. There are however solutions to volatility within the Crypto sector, which we will take a look at later.

Bitcoin Is Not A Threat

Bitcoin and altcoins are not necessarily a threat to the dollar. However, stablecoins might be interpreted differently due to their parity with the dollar. In other words, were the infrastructure to exist, society could shift to a stablecoin. This could well be the true motivation behind the recent regulatory crackdown on stablecoins.

One could also argue that perhaps this too is the motivation behind the SEC saga with Ripple. Even though XRP is not a stablecoin, its primary use case is cross-border payments and value transfer. This is currently conducted via the dollar.

Bitcoin, on the other hand, is different. It’s very much a speculative move. People acquire Bitcoin in the hope that it will appreciate over time. The same also applies to altcoins. Value transfer doesn’t really play into the current narrative of Crypto users.

This Can Change

Even though stablecoins would be the ultimate solution for Crypto payments, there are alternatives. Accepting Bitcoin via the lighting network doesn’t have to be a “volatile experience”. Setting up “immediate settlement” systems within the applicable payment infrastructure would eradicate price volatility. In other words, value is preserved at the very moment that the transaction is authorized and confirmed.

There are many ways that one could go about accepting Crypto as a payment method without worrying about loss due to price volatility. What do you think banks have been doing with XRP all this time? The transaction is almost instant, minimizing the risk of volatility-induced loss. The same is applicable to a lightning transaction. Utilizing the native Bitcoin chain is however an entirely different story and one that I wouldn’t advise, for this particular objective.

Stablecoins Are Perfect But Not Necessary

Stablecoins are definitely showing signs of significant adoption. Stablecoin Supply Ratio (SSR) is on a constant rise. A recent article from Bitcoin.com reveals how Binance’s BUSD has risen 22% in market cap over the past two months alone! The chart below reveals how active BUSD wallet addresses continue to rise, despite being in a bear market. However, many will obviously move into a stablecoin during a bear market, subsequently initiating a spike.

Image Source – Glassnode.com

The use of stablecoins is clearly the best option. However, it is not the only way that Crypto payments can become more mainstream. Given the choice, I would rather make use of stablecoins, but there are cases where using volatile Crypto assets can actually come in handy. For instance, making a purchase with one of your altcoins on the day that it pumps 20% would be a bonus, right?

The vendor, or company receiving the payment, would subsequently lock in the value of the sale via an immediate settlement protocol. In such a scenario, you get more bang for your buck, and the seller receives his desired price. This does however require infrastructure and strategic design. However, every difficult task has to begin somewhere.

Final Thoughts

Either way, Crypto payments can definitely become more mainstream over time. Depending on the outcome of the stablecoin regulatory framework, we could soon see a significant uptick in adoption. Once again, we have to remember that this is a journey. Not only that, but the finance sector is busy being restructured, though many are still oblivious to this.

Even though stablecoins present a more frictionless experience, there are other alternative methods, if needed. At this stage of the game, I think it is important to be ready for any outcome.

Disclaimer

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