As opposed to fiat currency, cryptocurrency is not connected to governments or central banks. Using a ledger system, cryptocurrency transactions are anonymous and decentralized. Bitcoin’s value, for example, is determined by demand and market supply at any given time, much like precious metals. Due to the fact that no government regulations apply to cryptocurrency and transactions are untraceable, there is a risk of abuse of the system for illegal activities including terror funding and drug trafficking.

Some advantages of using cryptocurrency for payments

Despite the risks, cryptocurrencies have several significant advantages as well:

• Lower fees

When utilizing credit and debit cards, and handling transfers, foreign transactions, false declines and many other types of financial activities, there are fees involved. These fees tend to mount up and become quite costly. Cryptocurrency payment gateways charge only 0.5 to 1% per transaction. Most cryptocurrency accounts that take the form of a digital wallet are free.

• No chargebacks

One of the major banes of credit card use for payments is chargebacks.The cancellation of credit card transactions by purchasers can be extremely costly for merchants. But when it comes to cryptocurrency transactions, the basic rule is that they cannot be reversed. 

• Securing personal data

Consumers are concerned about how retailers, service providers and financial institutions retain extensive amounts of sensitive personal data from an individual’s name, address and email to credit scores and net worth. When performing cryptocurrency transactions, data is converted into numbers, or cryptocurrency wallet addresses, so private information is not revealed. 

• Cross-border payments

Cryptocurrency payments are not classified according to countries. There are no cross-border fees, and no limitations on accessing funds. As banks and credit card companies are not involved, users can make payments, pay bills and shop independently.

More service providers and retailers are accepting cryptocurrency

Cryptocurrency acceptance is becoming more widespread among large service providers and retailers. AT&T recently became the first mobile carrier to accept bill payments in cryptocurrency. The Shopify ecommerce platform allows its merchants to accept Bitcoin payments through BitPay.

Microsoft permits users to deposit Bitcoin in their Microsoft accounts for the purchase of movies, games and apps in the Windows and Xbox stores. The large retailer Overstock has been accepting Bitcoins and other major cryptocurrencies since 2014. Paypal also allows merchants to accept Bitcoin through Braintree. There are many small businesses that are accepting cryptocurrency payments today.  

What lies in the future for cryptocurrencies?

Cryptocurrencies like Bitcoin lack basic stability because they are not a pegged currency. By nature, they are more like a commodity asset for trading like precious metals. Some enterprises (like Facebook) are introducing stablecoins which are pegged to certain currencies, thereby securely anchoring cryptocurrency. But this would stand in contradiction to the decentralized (and uncontrolled) nature of cryptocurrency.

COTI recently developed the world’s first DAG (directed acryclic graph) protocol for creating decentralized payment networks and stable coins. Other technologies are expected to emerge and innovate cryptocurrency norms. Time will tell what form cryptocurrency payments will ultimately take.   

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Stablecoins are pegged to major international currencies, thereby preventing the extreme fluctuations associated with cryptocurrencies. This means that the value of the coin  would remain steady regardless of demand levels. According to recent reports, Facebook is planning to launch a full payments network across its messaging apps, and is currently talking to Visa and Mastercard to bring them on board. It is also in the process of raising $1 billion from major banks in order to fortify the coin against currency fluctuations.

In-app payments for a readymade audience

With a built-in audience of 2.5 billion, Facebook will be able to revert its revenue model from ad-based to payment-based and transaction-based. The company recently announced plans to launch its first stablecoin project in India, where WhatsApp has 200 million users.

India is the perfect location to initiate the project because a large part of the population already prefers to use mobile payments. In addition, many Indians are unbanked, making an in-app remittance payment method ideal.

Frictionless payments through a global mobile commerce system

While India is a good starting point, the concept of frictionless payments through a mobile commerce system anywhere in the world is hypothetically a winning formula. This type of system has already proved itself for P2P payments, but a built-in e-wallet could significantly facilitate payments for online merchants and their buyers, and adopt a model similar to China’s WeChat.

Will it work?

While in theory all this sounds feasible, there is no guarantee that the attempt will succeed. For one thing, cryptocurrency is based on decentralization and has no controlling owners. Facebook’s new stablecoin would be controlled, by Facebook, of course. There are also crypto-related regulations that cannot be ignored.

In addition, several global competitors like New Telegram are hot on the heels of Facebook. Not to mention that TikTak and Toutiao are currently eroding Facebook’s global app grip.

Is this a crypto revolution or just a blip? Time will tell.     

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