Developments like those at PayPal
Much has been made written and spoken about the recent foray by PayPal and others into the cryptocurrency space, but that is just the tip of the iceberg in terms of blockchain and cryptoasset development. Adding 300 million customers who will be able to transact with crypto, and do so on a peer-to-peer basis, is good news for the ecosystem at large. Such developments might seem antithetical to the original idea and concept of bitcoin, but are key to the continued expansion and development of cryptoassets.
Bitcoin was an ideal, and while that ideal has not exactly worked out as planned, there are several developments that continue to accelerate blockchain and crypto adoption. Intermediaries and third parties might have been the players that crypto was designed to disrupt, but in order to actually get cryptocurrencies to be used as legitimate fiat alternatives there does seem to be a need for these intermediaries to be involved. Stablecoins and CBDC’s are simply symptoms of a much broader trend toward more semi-centralized and centralized blockchain and cryptoasset options.
Let’s take a look at just why the blockchain and crypto space needs, and will benefit from, the involvement of third parties and intermediaries.
Stability. Engaging third parties will help encourage broader usage of cryptocurrencies as fiat alternatives, and not just as investment options. Price stability has long been an issue for truly decentralized cryptocurrencies, but by involving some of the major payment processors, price volatility will hopefully become less of an issue. By working with, as opposed to against, incumbent financial institutions and third parties, cryptoassets will gain greater stability and greater utilization.
Prices for specific crypto can be higher or lower than others, but having the backing and infrastructure of well known payment processors can help reduce some of the more stomach churning price volatility.
Functionality. Crypto was designed to be a legitimate alternative to current fiat currencies, but in order for that to actually come to fruition these options need to be as convenient and as simple to use as current options. Linking in third parties, payment processors, banking institutions, or some other sort of institution will help make this possible. In the aftermath of the bitcoin price bubble of 2017, multiple peer-to-peer services and platforms have emerged, so in order to achieve mainstream adoption, crypto options will need to be as customer friendly as these current tools.
Venmo, Zelle, and Cash App should be leveraged to help make conducting crypto transactions, including being able to reverse or edit crypto transactions. Mistakes happen, and consumers need the confidence to ensure they can undo these mistakes.
Regulatory clarity. The rise of stablecoins, asset backed coins, or other forms of central bank digital currencies might strike many as the antithesis of the idea of cryptocurrency. As appealing a slogan as that might be, that is only a partial view of the situation; to get cryptocurrencies and blockchain at large to go mainstream, there is going to be a need for increased regulatory clarity. By working with established payment processors and financial institutions, all of whom already have experience dealing with the numerous compliance and regulatory rules, the pace at which crypto regulations are resolved will only accelerate.
Depending on which counterparty, individual, or institution is asked, the bringing together of blockchain and crypto organizations with established incumbents can be seen as good or bad news. Bucketing these developments into one single category, however, represents an incomplete view of the marketplace as well as one that will hamper the continued growth of the ecosystem.
Cryptocurrencies and digital money at large are the future of money, that much is clear, but in order for cryptocurrencies to fully generate and create the promised benefits it is increasingly clear that incumbent institutions must be brought into the conversation. Regulatory experience, price stability, and the increased clarity with which crypto can be treated and reported are simply a few of the benefits that can be derived from such an arrangement.
Blockchain and crypto are the future, and in order for that future to play out as promised, there needs to be partnership between crypto and incumbent financial institutions. This collaboration should be celebrated, encouraged, and accelerated if crypto ever hopes to achieve the widespread utilization that much of this promise is based on.