Does Crypto Still Have a Role in the Evolving Payments Landscape?

Even with all the questions swirling around the cryptocurrency industry after the staggering implosion of Sam Bankman-Fried’s once-heralded FTX exchange, customers and merchants are still keen on the ability to easily and securely accept and send cryptocurrency payments.

It bears repeating that FTX is not, by any means, a direct stand-in for crypto, and it is unfair to paint the entire industry with the scarlet letter of the exchange’s failure. Despite the echo chamber of negative headlines surrounding crypto, the Web3-grounded currency solution is still viewed as an important and emergent, bleeding-edge space — particularly within commerce.

BitPay Chief Financial Officer Jagruti Solanki discussed with PYMNTS what’s top of mind for the payment processing service’s client user base, as well as the ways the crypto landscape and its associated industries more broadly are dealing with the fallout from FTX’s abrupt and far-reaching collapse.

Silver Lining

Some positives are coming out of the FTX debacle, she said. For one, “a lot of companies will start to do a lot more thoughtful diligence. It might slow things down, but the reason is to prevent exactly what’s happening now, and long term, this is good to protect the consumer.”

For another, “the consumer — they probably know more now than what they knew even six months back [about the risks in the space]. They now know what to ask and look for, what they need to do on the crypto side.”

The growing pains experienced by the volatile crypto industry as it becomes further adopted by merchants and customers as part of a global payment solution ecosystem may help validate its seat at the table.

One of the common concerns of merchants operating in today’s connected economy is around the avenues for transacting with digitally native, crypto-forward consumers without having any direct exposure to cryptocurrency on their balance sheets or holding any tokens themselves.

This is a growing need, and one that next-generation digital payment solutions like BitPay were tailor-made for.

Need for Speed Supports Peace of Mind

While the aftershock of FTX’s unraveling is creating highly unfortunate knock-on effects for other players with exposure to the exchange and retail investors in the space, the merchant community is stoically weathering the storm.

“We absorb all the volatility [for our clients], which is a comfort for businesses to get rolling,” Solanki said. “Beyond that, our merchants are also looking to make sure they get their money on time. If someone is accepting crypto on behalf of their shoppers, they expect that money in whatever fiat denomination they prefer, without having any exposure to the liquidity considerations of the intermediary or middlemen processing these transactions. The assurance that you will get your money in real time and not be buffeted by any volatility or liquidity challenges existing in the market is huge. Even though market conditions are what they are, we continue to see an increase in number of transactions.”

After all, unlike the venture capitalists piling billions into FTX, these merchants and platforms have presumably done the proper research into what vendors they sign up and agree to work with. Even the most basic risk mitigation approaches and vendor diligence can help to weed out the bad actors and provide peace of mind.

Still, “at the end of the day, news of this kind is always going to create fear and a kind of resistance that slows down adoption of alternative payments,” Solanki said. But this type of “slow down” can be mitigated by increased consumer education around the risks and increased merchant confidence in their internal backstops and controls.

The way people deploy and use their crypto is also increasingly changing. Exchanges are seeing an increase in outflows as people take their tokens elsewhere, and industry players see a boom in the use of stablecoins. Just with BitPay’s platform alone, stablecoins represent around one in every five transactions.

“That’s another way to continue transacting in crypto without getting impacted with volatility as much, although it is important to make sure the stablecoins are backed appropriately and confirm the issuer has sufficient and valid reserves,” she said.

The qualities of cryptocurrencies that make them attractive as a method for payment — be it their speed, anywhere-anytime accessibility, the mix of privacy and transparency, or lack of fees — are likely to weather the storms affecting the industry today. As crypto emerges stronger and better supported by right-kind regulations, it will be interesting to see the impact its capabilities have across the business and commerce landscapes of tomorrow, she said.

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