Categories: Cryptocurrency

Bitcoin Fails To Take Off As Payment Method

Bitcoin’s use as a form of commercial payments has declined during the year, at the same time that the digital token appears to be stabilizing.

According to a report in Reuters, citing Chainalysis, the blockchain research firm, the value of bitcoin handled by payment processors declined close to 80 percent this year ending in September, signaling that bitcoin is still having a tough time moving away from being a speculative asset. It also comes as stability in bitcoin prices this year has fueled hope that it would take off as a payment method.

That’s not to say it’s been all smooth sailing for the price of bitcoin. A recent bitcoin bust continued Monday (Nov. 19), with the price of the cryptocurrency falling to $4,905 by mid-afternoon, a decline of at least 12 percent. Over the past week, the price of bitcoin has declined some 20 percent — and at least 60 percent since January.

With bitcoin failing to be adopted as a viable payment form, crypto players are focusing on creating a better infrastructure to enable the cryptocurrency to become a payment method. “There would have to be a stability requirement if it is to become another form of money,” Joni Teves, a strategist at UBS in London, told Reuters. “But one thing that would take bitcoin into the mainstream is scalability — is it able to process the value or volume of transactions that money tends to do?”

Reuters noted that even with bitcoin prices stabilizing, the value of bitcoin payments has declined to $96 million in September from a high of $427 million in December. Chainalysis data is based on a survey of 17 bitcoin payment processors. The report noted that among the merchants that do accept bitcoin, many don’t do it directly, relying rather on intermediaries to convert bitcoin to fiat currencies.

According to supporters of bitcoin, in order for it to gain traction among the masses, it needs to be faster and cheaper. What’s more, financial regulators around the world have to issue clearer rules on the asset to give bitcoin a sense of legitimacy, noted Reuters.

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The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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