Bakkt CEO: Crypto Utility Starts With Payments

Crypto, whether by accident or design, faces one banking crisis in the United States

That is why it is becoming increasingly important for industry leaders to conduct education about crypto’s usefulness across important areas of use and behave like an adult,” Gavin MichaelCEO of listed crypto company Bakedsays PYMNTS CEO Karen Webster.

In the wake of Silicon Valley Banks (SVB) collapsethe crypto sector’s own two main banks, Silvergate Bank and Signature banklater closed within days of each other – one voluntarily and the other somewhat involuntarily.

Michael adds that the customer base “concentration risk” that triggered March’s ATM crisis is now forcing people to “balance what is good business and what is bad.”

“We do a lot of heavy lifting to prove the point that crypto has a place in the overall economic ecosystem, and it can be as simple as there being digital assets that need to be stored somewhere – or it can go all the way to actually finding new ways of moving money using new and innovative rails, says Michael.

He emphasizes that after the series of unfortunate events last year affected the entire sector, education and retraining of the marketplace has been given a mission-critical priority.

“If you’re thoughtful and run a compliant culture, you’re really in a position to grow the right way,” says Michael. “And that’s good for the industry.”

read more: Banking crisis contagion spreads to crypto

Crypto can be a chameleon, so the utility must be obvious

Asked to define exactly what he considers crypto to be, Michael says it’s “a set of infrastructure that allows new ways and new opportunities for people to engage and drive customer value.”

A common use case for this infrastructure is trading, notes Michael, adding, “some of it is in a speculative way because people want to diversify their portfolios…but we know that not all cryptoassets are created equal, and so it’s a big part of the regulatory discussion right now.”

Complicating the use case for trading, at least in the US, is that absent a trusted, regulated banking partner, crypto companies are forced to hold both their own money and customer funds with third parties, which can slow down the sending and moving of funds.

“Where we see the narrative moving now is all around utility — how do we bring utility to [crypto] space, and that’s where we start to influence the payments, says Michael.

This includes looking at stablecoins and other digital asset use cases that can “improve settlement time, improve trust and reliability, all while doing interesting things at the protocol level,” Michael highlights. “How can I add more information to the payment that alleviates some of the processing that needs to happen beyond just transferring the currency?”

He adds that “remittances make sense”, and emphasizes that the ability to insert invoice numbers into payment protocols will allow reconciliation through enterprise resource planning (ERP) systems in a much simpler way.

See also: Can Crypto’s value proposition ever translate into real value?

Can crypto and the traditional financial system peacefully coexist?

“How do we [as an industry] optimize for the right payment cases, micropayments, cross-border remittances, how can we do better than today’s rails?” Michael asks.

He emphasizes that crypto is not trying to replace the existing infrastructure – just that the crypto industry should prioritize providing a new payment rail that works well across other use cases.

“Clarity in the regulations is really instrumental in creating suitable railings so that [the industry] can put in place the right innovations around payments so that they can flourish, says Michael.

He adds that across the landscape there are generally “positive signs” that if companies solve the right problems, it will bring “really powerful financial innovations” that can co-exist with traditional finance “for a long time.”

Michael says that he is constantly talking to banks that have customers with digital assets that they would like to be able to store in a safe place.

“It’s definitely a journey, and one of the first use cases is around storage and accessibility,” he says.

What is Michael most excited about as he looks to the future?

“It’s about lighting up this ecosystem … how can we help tokenize funds and assets, smooth payments by allowing an easier way to make payments. And how can we be the best partner we can be to that traditional sector, to FinTechs and Neobanks as they continue to innovate around the same pieces,” he says. “We as an industry need to be very clear to the market about what crypto is and the way we represent both that and ourselves.”