Crypto Payments: When the Tech Fades to the Background

The evolution in interest among TradFi, which was once dominated by diehard crypto skeptics, from crypto curiosity to crypto commitment is perhaps the industry’s most important move yet.

By Dante DisparteLayer 2
AccessTimeIconApr 25, 2022 at 11:38 a.m. UTCUpdated Apr 25, 2022 at 12:19 p.m. UTC
By Dante DisparteLayer 2
AccessTimeIconApr 25, 2022 at 11:38 a.m. UTCUpdated Apr 25, 2022 at 12:19 p.m. UTC

Dante Disparte is the Chief Strategy Officer and Head of Global Policy for Circle. Before, he served as a founding executive of the Diem Association, leading public policy, communications, membership, and social impact.

You know you are still in the early days of a new industry when conferences are entirely devoted to the hardware and software, rather than the outcomes that people care about.

With the just concluded Bitcoin Miami behind us, it seems fair to ask whether Satoshi Nakamoto's promise of a peer-to-peer electronic cash system will be made possible, even while bitcoin maximalists declare that the cryptocurrency will be the only currency in the world of tomorrow.

The promise of crypto payments may seem elusive 13 years after the publication of the pseudonymous Nakamoto's Bitcoin white paper ushered in the blockchain revolution. However, it is useful to go to another conference (one that is more of a mainstream payments event) to get a read on whether crypto remains “fringe finance,” or if it is breaking into the mainstream.

This piece is part of CoinDesk's Payments Week.

At Money 20/20 late last year in Las Vegas, the crypto conversation, which used to be relegated to the margins, was a main stage conversation. Many events were standing room only, including those with stalwart payments, banking and traditional financial services firms (or TradFi in crypto parlance).

The evolution in interest among TradFi, which was once dominated by diehard crypto skeptics, from crypto curiosity to crypto commitment is perhaps the industry’s most important move yet. Not because digital assets needed the legitimization of Wall Street, but because Wall Street needs the always-on power, trust and business model transformation of open blockchain networks.

The most prominent crypto about-face belongs to JPMorgan, whose CEO Jamie Dimon infamously threatened to terminate any employee caught trading in crypto; his bank now embraces blockchain and decentralized finance (DeFi). They are no longer alone among financial services firms that are household names.

Antithesis or synthesis?

The question, however, is whether crypto payments will compete with existing payments and banking rails, or will a trend of convergence make crypto payments an alternative settlement layer for traditional players, thus building a bridge to everyday use.

Nowhere is this trend clearer than in the stablecoin segment, which are asset-backed cryptocurrencies designed to maintain price stability to underlying reference assets. Indeed, precisely because stablecoins hold the promise (more so than any other activity in the crypto economy) of being used by billions of people for everyday economic activity, they have animated a global policy and regulatory review.

Even though not all stablecoins are created equal, by solving crypto’s original sin of buyer’s and spender’s remorse, stablecoins like USDC are breaking into a class of use cases that require underwriting. In short, the ability to satisfactorily “show me the money” has marked a breakthrough in stablecoin use in real-world payments.

Indeed, as the blockchain development race gathers steam, high performing blockchains, such as Solana, and newer chains, such as those launched by Novi alumni, one innovation transcends them all – the stablecoin, despite myths and occasional FUD.

The years ahead

Are we headed to an omni-chain future that may very well replicate the walled gardens in the traditional economy? Or are we headed to a world with one chain to rule them all?

This cycle of creative destruction in the blockchain or Web 3 market means the internet of value is already here, but it may still be in its dial-up phase.

What will the transition look like to “mainstream adoption,” whatever that even means? Is it that the promise of crypto payments merely gets co-opted by traditional players that were late to the party? Or, will mainstream adoption really mean population scale peer-to-peer payments, where friction and the lack of interoperability not only fade to the background, but national borders do as well?

Blockchain will change the world more than it already has when the technology fades to the deep background. Likewise, crypto payments will have changed the world when there are no longer conversations about cross-border payments, but rather low-cost instant payment networks of global scale enabling instant value transmission between trusted parties.

Achieving this state won’t be possible for any single firm, no matter how big or technologically endowed they may be, or what regulatory or operational moat they may enjoy courtesy of proprietary technology or political favor. Rather, turning every internet connected device on the planet into a compliant payment endpoint may very well be one of the world’s most important technological priorities.

Some projects have famously (or perhaps infamously) endeavored to connect these dots, while others continue to forge ahead committing to open source innovation and public blockchains as the financial infrastructure of the future.

More than 200 million people have taken the long position on this bet, and some now can even buy a cup of coffee with a stablecoin.

More from Payments Week:

Blockchains offer unique advantages, but these must be combined with a user experience that feels similar to the one consumers know today, writes Senior Vice President Jose Fernandez da Ponte.

Financial censorship has gone from an abstract idea to a harsh reality for Russians who suddenly found themselves unbanked by the West and their own government.

Down The Silk Road: Where Crypto Has Always Been Used for Payments

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Dante Disparte is the Chief Strategy Officer and Head of Global Policy for Circle. Before, he served as a founding executive of the Diem Association, leading public policy, communications, membership, and social impact.

Dante Disparte is the Chief Strategy Officer and Head of Global Policy for Circle. Before, he served as a founding executive of the Diem Association, leading public policy, communications, membership, and social impact.