Crypto for Coffee: Is That Day on the Horizon?

An instinctive reaction to any new technology is that it will disrupt, and potentially even replace, the traditional areas it moves into. This is certainly true for cryptocurrencies, with many supporters positioning cryptos such as Bitcoin as an eventual and inevitable replacement for fiat currencies. But not everyone is convinced, myself and my Wild3 co-panelists Benjamin Quinlan and Joaquín Ayuso de Paul included. In fact, we believe that scenario is looking increasingly unlikely. As Joaquín, Head of Nium Labs, noted, crypto is an evolution of the financial system, not a replacement. This is a critical point. ?

Rather than being a threat to traditional finance players, crypto is in fact expanding opportunities for incumbents like Mastercard to integrate our global networks and knowledge with these emerging payment technologies.

Looking ahead, the success or failure of cryptocurrency will ultimately depend on the applicability and reach of its use cases. Like any technology, if crypto can solve a problem or pain point for users, then it’s more likely that it will be adopted.?

The early signs are encouraging. We’re already seeing how the decentralized finance?(DeFi) ecosystem is developing use cases that leverage crypto and the underlying blockchain technology to bring value to the wider financial services sector. These include lower transaction fees, faster processing and settlement speeds, democratized access to services, and transaction transparency.

Yet the burning question remains: If crypto offers all these benefits, why aren’t more people using it to pay for things in the real world? Real things like their morning coffee.

One of the most quoted arguments against crypto is that coins such as Bitcoin are too volatile to be a viable form of everyday payment. After all, few people want to use a currency that can fluctuate in value in the time it takes for their coffee to be prepared. I’m no exception, but the emergence of stable coins pegged to a fiat currency means that this is unlikely to remain a long-term barrier.

Another drawback of paying by crypto is transaction speed. As Benjamin Quinlan observed, it currently takes about 10 minutes for a Bitcoin transaction to settle. With so many alternatives that work not only faster, but instantaneously, crypto can’t compete (especially in a coffee queue).

Again though, this is not an unsurmountable problem and traditional finance players and fintech firms are already working together to find solutions. For example, Mastercard is working with partners to provide technology that allows crypto holders to off-ramp and on-ramp their coins into fiat or even loyalty points, which would expand the possibility of instant crypto payments at more than 92 million locations worldwide where Mastercard cards are accepted.

Once crypto-linked payment cards become more commonplace, the success or failure of crypto as a payment method becomes a matter of personal choice. Do consumers prefer to pay with crypto or will they choose cards, digital wallets or even good old-fashioned cash??

Which leads us to the real limiting factor for crypto: how many merchants can and will accept it as payment??

As I said, the ‘can’ part of the equation is already in the works as we enable changes to Mastercard’s network that would allow merchants to accept crypto. But the degree to which merchants will want to use this technology will always be driven by the consumer: the more people want to use cryptos, the more incentive merchants will have to accept them.

At the end of the day, the future of finance is not one where one form of currency replaces another, but one where consumers and businesses will have a much wider range of payment choices.