Is Payment Network Adopting Cryptocurrencies a Clear Indicator of the Increasing Acceptance?

Recently, MasterCard announced that it is including cryptocurrency in its network.

This essentially meant that MasterCard would support select cryptocurrencies on their network. Apart from the traditional payment methods, businesses and customers can transact using cryptocurrency. MasterCard considers it a win-win decision as customers will have payment flexibility, and businesses can        build loyalty by offering flexible payment options.

With 45% of customers considering the option of using cryptocurrency next year, the decision of including it in the network could not have come at a better time.

In fact, cryptocurrency received a boost when El Salvador became the first country to recognize cryptocurrency as a legal tender officially. Economist Eshwar Prasad also predicts that the era of cash is coming to an end, and digital currencies like cryptocurrency will replace it.

So, what do all these developments and predictions mean for the overall future of cryptocurrencies, and what can customers and businesses expect from them?

Let’s understand this in detail.

Is there an increased acceptance of cryptocurrencies?

To answer this question, we must first understand why cryptocurrencies are becoming popular among customers and businesses.

Benefits for customers

Cryptocurrency is gaining momentum, with 1.5 million transactions occurring every day. More customers will warm up to cryptocurrencies as the world moves towards cashless and contactless payments. Here are a few factors that are contributing to its popularity.

• Unlike fiat currencies that the Government controls, cryptocurrencies are decentralized.
• Customers don’t have to worry about traditional yearly charges or transaction-based charges, which makes inter-country travel cheaper and convenient and encourages cross-border money exchange.
• Cryptocurrency can be purchased using any currency from a cryptocurrency exchange and be converted without paying high transaction fees.
• Cryptocurrencies are relatively safer than other traditional currencies as they rely on decentralized ledgers that are hard to encrypt. They rely on pseudonyms that are not related to any user account. The transactions are identified by using a blockchain address.

Benefits for businesses and merchants

Businesses have also started adopting cryptocurrencies as an alternative payment option. Brands like Coca-Cola and Yum brands, for instance, have already begun accepting payments in cryptocurrency. More than 2,300 merchants are accepting bitcoin as a payment option in the US. 

Here are some benefits for businesses and merchants:

• As cryptocurrency uses encryption for transactions, businesses can be assured of secure payments. The transactions also conclude faster than fiat currencies.
• Some cryptocurrencies charge transaction fees as low as 0.04% to 0.10%. Traditional payment options charge up to 4% transaction fees.
• As cryptocurrencies leverage decentralized ledgers, businesses don’t have to pay centralized intermediaries. The decentralized ledger removes the dependency on intermediaries and gives the business control over their transactions and funds.
• Cryptocurrencies enable businesses to do international transactions without any restrictions and accept payments in multiple currencies.

Challenges in adopting cryptocurrencies

The benefits of cryptocurrency have not translated to the ground yet. 67% of cryptocurrency owners say that there’s a shortage of merchants who accept digital currencies. Businesses are yet to fully trust crypto payments as one of the alternative payment options. That’s not all. There are also other bottlenecks in cryptocurrency adoption.

• The biggest challenge is varying regulations in different countries. Countries like the US and Canada allow the use of cryptocurrencies. India, Egypt, China have not legalized it yet.
• The lack of consensus has also led to regulatory issues. So, although cryptocurrencies can be used for inter-country payments, there’s uncertainty about their acceptance in different markets.
•  As the cryptocurrency is still at a nascent stage, there’s a lot of volatility in the market. The lack of authority and fear of price manipulation have further precipitated the problem. Experts believe that the volatility could hamper its growth and customers. It will take time for businesses to use it for daily transactions.

Conclusion

Coming back to the question, yes, there’s a chance that cryptocurrency will find wide acceptance among customers and businesses in the future. The global cryptocurrency market is poised to hit a valuation of $4.94 billion by 2030. Over 50% of crypto investors are willing to use it to pay for shopping.

However, countries and regulators must reach a consensus on cryptocurrency soon. Gita Gopinath, the IMF Chief, said that banning cryptocurrencies could pose challenges for emerging markets. There’s an urgent need for strong regulations.

Regulations could have some repercussions on the peer-to-peer architecture of cryptocurrency. However, it would be necessary to encourage more businesses and customers to use it.

While these issues are ironed out, financial institutions must start preparing to include cryptocurrency in their network and stay future-ready.