The new math for crypto payments

There is a fundamental difference between paying with crypto and paying in crypto, which will play a big role in whether the wider public will use bitcoin, ether and the like in the checkout and checkout screen.

Currently, people mostly pay with crypto, but think in dollars – for example, using a crypto debit card at the point of sale. This works fine if you are a crypto investor who wants to be able to use it without going through the hassle of going to an exchange and cashing out some of your bitcoin holdings.

Not-So-Currency

It’s not a big deal when you’re buying a sofa or a car, but it’s unreasonably inconvenient for a cup of coffee or dinner at a restaurant. And that essentially assumes that most or at least a significant portion of your disposable income is held in crypto. Which again assumes that you are a serious crypto investor who believes that your bitcoin, ether, dogecoin, XRP or whatever will increase in value so much in the long term that you want to keep all or at least a large part of your crypto wealth .

Or that your salary comes in crypto – something that several companies, such as the exchange Coinbase, are trying to make easier for employers.

But paying with crypto isn’t really a revolution, it’s more like a debit card drawn on a money market account. And that’s not really practical, especially with cryptocurrencies that regularly fluctuate 5% or 10% or more on a daily to weekly basis – and rise or fall 50% or more over several months.

A good way to think about it is to consider paying for things as a tourist in a foreign country. Not in the Eurozone, where 1 euro is currently 1.01 dollars, but somewhere where 27, 3,872 or 680,000 of the local currency equals 1 dollar. When you’re in that situation, you usually spend days doing FX conversions in your head or asking Siri every time you buy something. Eventually you’ll get the hang of it, but crypto’s fluctuations can make it more like a tour group seeing a new country every few days.

Do you pay with crypto?

Is it worth going through the process of accepting crypto as a merchant? Secure. A growing number of people want that ability and will seek out sellers who provide it.

See also: PYMNTS data shows use of crypto for in-store purchases is growing

According to PYMNTS’ study The US Crypto Consumer, Cryptocurrency Use In Online and In-Store Purchases, 27% of crypto-owning consumers say they “probably” or “definitely” prefer to shop at merchants that accept crypto.

But for crypto to do what Bitcoin creator Satoshi Nakamoto wanted — to make cryptocurrencies a substitute for national currencies on a daily basis — it’s a long way off.

Thinking in crypto

For people, paying in cryptocurrency essentially means thinking in it.

“There’s a cognitive shift that needs to happen,” Kevin Beauregard, CEO of blockchain game studio Atmos Labs, told PYMNTS recently. “People have to think in a different currency. Most people in the real world think, ‘I work for a job, my salary is paid in dollars, and I expect to accumulate more dollars over time.’

It has changed in one place, he believes: Nonfungible tokens (NFTs).

The original NFT marketplaces all priced and sold NFTs in ether — ETH — and early collectors, who tend to be hardcore crypto users, now think in ETH, Beauregard said

“They’re basically saying, ‘I bought this NFT for this much ETH, and I can sell it for this much ETH,'” he said. “They’re actually thinking in ETH now.”

It’s something he, he said, would never have thought possible five years ago.

However, his point was that dollar-pegged stablecoins remove the need for the cognitive shift. “Getting to a basic unit of account that people understand is an important thing,” he added.

That was one of the big reasons why central bankers, treasury departments and international financial institutions blasted Facebook’s Libra project so hard at the time – it was a stable coin tied to a basket of currencies, but not a single one, like the dollar. By allowing 2.3 billion users to instantly think and pay with libras, the project would make them stop thinking in their own currencies, reducing control and authority. That is why many countries with weak currencies are not happy when people “dollarize” purchases.

While stablecoin opponents fear that privately controlled cryptocurrencies will harm central banks’ ability to influence the economy, removing the national currency as a mention or commodity takes it a step further.

But it is a very big step.

And paying with a dollar-pegged stablecoin (in the US) offers some conveniences on the back end, like instant settlement and cross-border payments, but as many stablecoin opponents have pointed out recently, FedNow and The Clearing House have the first part covered, or will soon , and cross-border payments are not a daily need for most individual consumers.

The utility of stablecoins – outside of the crypto trading and DeFi world – at this point is largely to make it easier for crypto owners to make payments than by deciding whether to spend 0.00045 BTC.

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