Cryptocurrency enthusiasts often argue that businesses need to start accepting crypto as payments for adoption to grow — boosting usability and potentially creating strong demand for these currencies.
Some crypto communities often focus heavily on growing business adoption, with maps now compiling businesses worldwide that accept different cryptocurrencies as a payment method.
But if a business accepts cryptocurrency payments only to dump them on the market, it may undermine the entire effort, as the assets are just being sold back on the market right after payment.
Moreover, a business accepting cryptocurrency payments through a third-party processor isn’t adhering to the cryptocurrency ethos of managing their own private keys, meaning controlling their wallet fully.
On the flip side, proponents argue that the mere act of enabling cryptocurrency payments opens up new avenues for consumers to transact in crypto, bringing in a new, long-awaited use case.
Do businesses accepting crypto boost adoption?
On its surface, a business accepting cryptocurrency payments would boost adoption. Still, if the digital currency received is immediately sold back on the market, it’s generating as much demand as it is supply. This simultaneous buy-sell cycle may not significantly contribute to cryptocurrency adoption.
Additionally, it isn’t clear how relevant a business accepting cryptocurrency payments can be for actual adoption, as users are unlikely to go through the process of buying cryptocurrencies if they can just pay in their local fiat currency.
The essence of adoption doesn’t merely reside in the act of acceptance by businesses; it fundamentally lies in the ease of access and willingness of consumers to transition to cryptocurrencies for their transactional needs.
The study found that cryptocurrency payments bring in up to 40% of new customers for merchants, with crypto customers spending twice as much as those using credit cards.
Speaking to Cointelegraph, BitPay chief marketing officer William Zielke referenced the Forrester Consulting study and said cryptocurrency payment processors give cryptocurrency spenders a fast, easy way to pay for large ticket items and everyday purchases.
Zielke said that during the first half of this year, BitPay saw a 10% uptick in new customer sign-ups compared to the previous year despite the volatile cryptocurrency market. He added that while some brands may already have a technically savvy user base when they start accepting crypto, other merchants may end up introducing new users to crypto:
“Alternatively, merchants like AMC Theatres connect with a broad base of customers who may need to be better-versed in the crypto world. Partnering with big brands like AMC Theatres is an excellent way to boost consumer adoption since it introduces crypto payments for everyday purchases.”
Sankar Krishnan, head of digital assets and fintech at consulting firm Capgemini, told Cointelegraph that money serves “both transactional and savings purposes” and that he would argue that “cryptocurrency captures greater interest from consumers today as they anticipate its value will rise in the future.”
Nevertheless, Krishnan said it’s crucial to acknowledge the risks associated with cryptocurrencies, including their extreme volatility, which means that the mainstream adoption of cryptocurrencies for everyday transactions is “still a work in progress.”
Per Krishnan, when cryptocurrencies “become a more viable option for day-to-day purchases, we can expect more payment providers to embrace and facilitate cryptocurrency transactions.” He added, however, that whether a business keeps the cryptocurrencies it accepts for goods and services or sells them right away “is linked to the company’s treasury strategy.”
According to the Capgemini executive, the price volatility of cryptocurrencies heavily influences this choice, as the market can move in either direction between the firm accepting payment and selling the digital assets, which would only be beneficial if it were actively engaging in crypto trading.
A business accepting cryptocurrency payments and selling the crypto right away, Krishnan said, also “sends a clear message to the market that they do not anticipate the cryptocurrency’s value to appreciate in the future.” Per his words, it’s a “de-risking move” the business makes.
Speaking to Cointelegraph, Justas Paulius, CEO of cryptocurrency payments processor CoinGate, took a balanced approach and said that it can’t be proven whether this buy-sell cycle has “a small, large or no impact at all as there are many factors that need to be considered first, for example, which cryptocurrency is being used, how and where it is being sold, and how much.”
Paulius added that consumers “tend to re-purchase cryptocurrency they’ve spent soon after,” suggesting that when businesses accept cryptocurrency, there’s indeed higher demand. He said, however, that the advantage may be in the generated liquidity:
“Whether the currency is being bought or sold, these actions from both sides create better liquidity in the market and, in a way, balances each other out, also helps determine the true price of a currency at any given moment.”
Businesses accepting cryptocurrency payments may nevertheless boost adoption in other ways, including by simply spreading awareness of their support for cryptocurrencies or specific payment processors that may offer other services.
Crypto payment processors as on-ramps
Cryptocurrency payment processors may allow businesses that do not accept cryptocurrency payments directly to allow consumers to pay with them. Major automobile manufacturer Honda, for example, does not accept crypto payments, but through FCF Pay, people can use Bitcoin and other cryptocurrencies to buy a Honda car.
Paulius noted that awareness spreads as “people see these payment options being introduced by small and large businesses every day,” which signals a growing demand for digital assets. These signals, he said, could see businesses’ competitors become “intrigued and curious.”
He added there’s “little-to-no downside to enabling a crypto payment method,” but instead “brings several tangible benefits” to businesses that do. According to the Forrester Consulting study, accepting crypto does seem to bring in more customers who spend more.
Third-party payment processors, BitPay said, help businesses stay compliant with all local regulations to facilitate accepting cryptocurrency payments while promoting new businesses to the cryptocurrency community as they start accepting crypto payments:
“Leveraging third-party payment processors allows businesses to accept crypto payments without the need to touch or hold crypto, removing the volatility risks. The quick integration times and easy setup make it a simple, fast alternative to using your own wallet. Companies utilizing a processor also escape having to track their costs based on different coins for tax purposes.”
Speaking to Cointelegraph, Gracy Chen, managing director at cryptocurrency exchange Bitget, said that the “e adoption of new things requires extensive user education to establish awareness and trust,” and businesses using third-party payment processors “can play a pivotal role in popularizing cryptocurrencies.”
While third-party payment processors can seemingly be on-ramps for the cryptocurrency space, it’s worth noting that their use dilutes the foundational ethos of cryptocurrencies centered on decentralization and self-sovereignty. Using them also means businesses rely on an external platform to receive crypto payments, which could be hard to change in the future if necessary.
Paulius said that, in some cases, it may be more beneficial for businesses to manage their wallets. These firms, he said, could just use open-source solutions and run their own processors.
The move, however, would come with added risks “such as AML [Anti-Money Laundering] screening or KYC [Know Your Customer] management as you still need to follow the law and adhere to rules. He added:
“Businesses tend to want to accept many cryptocurrencies at once, but only get periodic payouts in a single currency like U.S. dollars or euros to a bank account, which would be challenging to set up by yourself.”
Paulius noted that businesses also want easy integrations, transaction notifications, and the ability to refund customers and accept payments on various networks, all of which are facilitated by payment processors.
While there are costs associated with integrating cryptocurrency payments with third-party payment processors, Paulius concluded, they are “still less expensive than processing card payments.”
While accepting cryptocurrency payments may be challenging for most businesses, what to do with the received amounts may prove just as difficult. Most companies accepting crypto payments convert the funds immediately, but what if they didn’t?
Why pay with crypto?
Even if businesses accept cryptocurrency payments — via their own solutions or third-party payment processors — one question remains: why would consumers choose to pay with cryptocurrencies over their local fiat currency, especially if they don’t previously own crypto?
Paulius said that in some cases, banking is not an option, and cryptocurrencies could be a much-needed solution. Refugees or people stuck in dire situations in countries foreign to them or where the financial system isn’t functioning could rely on a decentralized network for their payments.
While Paulius conceded that “it is not common for consumers to buy cryptocurrencies just to use them for retail payments,” it noted it’s “likely in several cases,” as some people value their privacy greatly.
“Many of those people use cryptocurrencies for buying VPNs, hosting solutions, proxies and similar services just because they can remain pseudonymous and disclose less or none of their personal information to fewer third parties.”
Cryptocurrencies, Paulius concluded, can also be a faster way to make transactions. Speaking to Cointelegraph, Ilya Volkov, CEO and co-founder of YouHodler, said that in the city of Lugano, Switzerland, BTC and Tether (USDT) can easily be used in various shops and restaurants via the same point-of-sale terminals used for traditional card payments.
Per Volkov, some startups are working on ways to use these terminals to let users pay directly from their MetaMask wallets.
Companies can provide a way for consumers to use cryptocurrencies, making these digital assets more familiar and useful. Additionally, third-party processors make it easier and less intimidating for businesses to start accepting cryptocurrencies, which might encourage other companies to do the same, seeing the growing interest.
The path to mainstream adoption is more complex, however, as what is done with the cryptocurrency and whether consumers even choose to pay in crypto play a pivotal role.
While more sophisticated and tech-savvy consumers will likely use cryptocurrency payments to protect their privacy, cryptocurrencies could also provide a lifeline in more extreme scenarios. Whether they’ll be accepted as a payment method when showtime comes remains to be seen.