What do AT&T, Starbucks, Microsoft, and Overstock have in common? They all accept crypto, otherwise known as coin, as a form of payment. Over 39,000 stores will now take everything from Bitcoin and BTC, to LiteCoin, the same way that they take cash, credit, debit or mobile payments. But will you buy your next Venti Latte with coin? Welcome to the next chapter of consumerization along the great crypto journey.
In 2014, two CNN reporters tried to live on bitcoin for a day and survived to tell the story. Back then, BitCoin ATMs were actually more plentiful than now, and gyros were purchased with Bitcoin and so were limos. This past February, another reporter in San Francisco attempted to replicate the CNN experiment, but had a tougher time.
Today, there are fewer Bitcoin ATMs and small businesses accepting coin. However, someone’s spending their coins. According to researchers, an estimated $5 billion in crypto was spent in 2018. Plus, the number of people worldwide holding digital assets has reached 30 million - impressive for such a short-lived currency.
Arthur Hayes, founder of Bitmex recently told Bloomberg, “Bitcoin is either worth zero or a lot. Buy what you can afford to lose and HODL.” HODL is the crypto community’s word for the phrase, “Holding On to Your Coins”, and was “coined” in 2013 when a drunken crypto holder mistyped the word “HOLD”.
Additionally, the coin holders I spoke with weren’t too excited about cashing coins for coffee. Brian Zisk, a longtime crypto enthusiast confided, “I should be spending crypto everywhere, but the requirements are too odious.”
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Peter Wokwicz, an advisor to a variety of high tech companies, concurred. “Government regulations are the primary blocker in wider acceptance of crypto for payments. Until this changes, merchants will be tentative on wider adoption.”
Despite the fact that the systems are open for business and transaction speeds can now be faster than the Mastercard/Visa network, and transaction costs are much lower, Wokwicz added that merchant adoption is slower than what most expected.
Chris Byrne, CEO at Overstock, a large Internet retailer, is the father of crypto-accepting retail. Because of his visionary exuberance, (the company’s plans for blockchain go far beyond buying consumer goods) Overstock has been accepting crypto payments since 2014, partnering with Coinbase, a crypto wallet. Byrne even paid his corporate taxes in crypto last year using OhioCrypto.com’s website.
Microsoft, Newegg, Dell and a few other retailers were early adopters too, but merchants are proceeding cautiously for numerous reasons, including latency of the transaction time and upgraded POS requirements combined with coin’s volatility in the market. A wide range of intermediary exchanges are jumping in to fill the gap between coin and the purchase of physical goods, and anxious coin companies have begun to introduce coin-backed credit cards to help consumers start spending their coin on physical goods.
Last month, The LiteCoinFoundation announced a partnership with Bibox Exchange and blockchain firm Ternio to release a physical cryptocurrency debit card. Coinbase has also launched a credit card backed by Visa that can be used internationally.
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Other intermediaries let you use coin to buy physical goods by handling the conversion for the vendor. Flexa is a B2B solution that allows consumers to spend cryptocurrency in physical stores Acting as an intermediary, Flexa accepts crypto from various wallets, pays the merchants in USD, and then goes through the more laborious process of cashing your coin.
Consumers will need to download Flexa’s app, SPEDN, onto their mobile device to shop. When the customer checkouts at a supported merchant’s store, SPEDN generates a QR code that scans at the checkout register. The merchant receives immediate payment in dollars and the customer’s digital wallet is debited the exact amount in cryptocurrency at the time of purchase. The technology supports Bitcoin, Ether, BTC, and the Gemini dollar. Flexa says it ultimately wants to expand to every retailer, but for now the retailer needs to be compliant on the POS side.
PaywithMoon, another new payments platform, just completed a special 5% promotional discount program for its members who used crypto during Amazon Prime Day. “While the numbers of people paying with crypto on Amazon is still a small fraction, Moon broke all previous records for consumers buying physical goods,” said Keith Kruger, CEO of Moon in our interview.
The brilliant irony of Pay with Moon is that vendors like Amazon don’t need to be involved, nor do you need their permission, to pay with crypto. PaywithMoon acts an intermediary. After downloading the app, customers select which crypto (BitCoin, LiteCoin or BTC) they want to use from any digital wallet. Pay with Moon pays the merchants with USD the moment the pay button is hit, and then resolves the crypto payments with 3rd party intermediaries.
Coin companies can benefit from merchant acceptance as coins become legitimized as something other than a stored value that sits in a wallet. With companies like Facebook and it’s blockchain arm, Libra, getting the attention of regulators, we’re likely to see even more clarity for consumers. For now, the fact is that merchants are accepting coin, even if the percentage of folks using it is low. As Glenn Fodor of First Payments said in a speech to the New York BitAngels and Ideanomics, “The genie is out of the bottle.”