Payment or Asset? Bitcoin's Limbo Is Leaving Merchants in the Middle

Is bitcoin more of a payment mechanism or an investment asset? A recent trial by a supermarket chain could shed light on the debate.

AccessTimeIconSep 25, 2017 at 8:00 a.m. UTC
Updated Sep 13, 2021 at 6:57 a.m. UTC

Word that South Africa's second-largest supermarket might accept bitcoin sent twitters of excitement through the cryptocurrency community last week – that is, until it emerged that, actually, they weren't going to.

At least not yet, and probably not for a while, if ever.

In a prime example of rapid reporting, headlines proclaiming mainstream adoption (in supermarket aisles at least) jumbled up the news. Pick n Pay was testing bitcoin acceptance, not rolling it out across its network.

In an interview with BusinessDay, the chain's deputy CEO Richard van Rensburg highlighted two interesting points that paint a much bigger picture.

One is that the authorities have yet to establish a regulatory framework to manage cryptocurrency risks. This is true for most jurisdictions. Earlier this year, Japan passed a law that recognized bitcoin as a legal method of payment. Since then, several large retailers in the country have announced that they will accept (or are considering accepting) bitcoin as payment.

That doesn't mean that a significant number of people are using it as such, however.

This brings us to van Rensburg's second point: there's not a clear business case for accepting bitcoin.

Window dressing

This may seem like a small detail, but it could end up guiding the development of the bitcoin market.

Why would stores accept bitcoin? Drawbacks include rising transaction fees, erratic confirmation times and the cost of retooling.

Advantages include the "cool factor" and the publicity that announced tests and implementation generates. Some retailers see it as an opportunity to broaden the market. And for bitcoin believers, there's the assumption that it's a currency and therefore should be accepted.

But its usefulness as a currency is debated.

Bitcoin was originally designed for "electronic transactions without relying on trust." Since its inception, however, it has evolved into a different type of financial instrument. It can be used for payments and transactions, but its limitations mean that it is not practical for most purchases, and expectations of it replacing fiat have dissipated.

On the other hand, the entrance of institutional funds and small savers into the market highlights its value as an investment vehicle. Its recent performance has attracted even more investors, which further consolidates its character as an "asset" rather than a "currency."

Meanwhile, after a flurry of bitcoin activity from merchants a couple of years ago, interest has dwindled. Several large retailers accepting bitcoin report that customer engagement is minimal. And regulatory uncertainty in most jurisdictions makes stores wary of investing in the process.

Store refit

Could the tide be turning?

Interest continues to trickle in from retailers and services, including some local governments. And the "wealth effect" theorizes that holders, emboldened by their new riches, will be more willing spend some of their bitcoin.

However, the concerns expressed by Pick n Pay's CEO – no doubt shared by many others – are likely to act as barriers to commercial adoption around the world.

While the number of purchases with bitcoin will probably increase as the sheer volume of transactions continues to climb, the bulk of the growth will most likely come from other use cases. Part of that will come from practical applications such as cross-border transfers. Nevertheless, the recent cultural emphasis on the investment potential does point to a change in perception.

A shift in focus from bitcoin-as-a-means-of-payment to bitcoin-as-an-investment could have longer-term implications for development. Lowering transaction costs and working on sidechains would become less of a priority, enhancing security and trading venues more so.

Regulatory clarity could gather pace. The multifaceted nature of bitcoin is difficult for regulators to get their head around – a more focused approach would make it easier to draw up specific protections, which in turn could further encourage a certain type of use.

And confusion amongst the mainstream media and general public could gradually give way to an understanding that this new technology is not a threat to the established system – it can complement it, become part of it and help it to evolve.

Out of sync concept via Shutterstock


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.