Bitcoin continues to receive the most attention out of all the cryptocurrencies, despite the recent rise of several altcoins that threaten to outshine it. You can buy a Tesla with bitcoin (BTC), Visa has announced it is supporting BTC trading through custodian banks, and PayPal’s offer of crypto to its members has seen a string take up of its service, as has Square’s Cash App.
Avivah Litan, a Gartner analyst, remarks, “These companies are offering bank cards that allow users to spend crypto balances and some even offer cash-back or crypto-back awards. We define these types of services as CeDeFi, or centralised decentralised finance.”
What we are witnessing is a market where DeFi apps are set to be embraced by traditional centralised (CeFi) financial companies (such as Visa and Mastercard) to give us a blend of centralised and decentralised finance systems.
However, some people are sceptical about this so-called ‘revolution’, because what happens in practice is, “these offerings come from CeFi companies who currently earn their money by charging transaction fees for settlement, payment services and clearing.” The question they are asking is: “in the future, will they have to pay these centralised services higher or further transaction fees for moving cryptocurrency across blockchain networks, therefore defeating the promise of blockchain.”
Litan suggests that what people are really looking for is something that we haven’t yet seen, and she offers the following ideas:
- Low cost on-chain payments using Stablecoin pegged to fiat currency
- Easily accessible applications for executing Stablecoin payments
- Lower payment acceptance fees than exist today in the card networks
- Transparent real time Stablecoin payments (and settlements) on blockchain, tied to underlying information supporting the payment
- Card brand and bank protections for Stablecoin funds sitting off chain in partner bank accounts
She highlights the fact that BTC is too volatile to be used for payments — even though that is its use case. However, there is a clear need for Stablecoin payments on blockchains. She says, “This is a value proposition that card brands and alternatives can offer, along with the value-added risk management, cash management, onboarding and more that are consolidated with existing fiat currency services.”
This may prevent payment companies and card brands from earning fees as they do today, but the blockchain is not about upholding the status quo; it is about removing the need for central clearing and moving to a peer to peer structure.
Litan concludes by saying, “Whilst some centralised financial services may not want to embrace the spirit of blockchain, they may find their hand forced as alternative emerging Stablecoin payment networks are more than likely set to fill the market need.”
Creditum plans to deliver Stablecoins to our users in the future. These cryptocurrencies offer a new for of price stability, because they are backed by an existing reserve asset, such as the USD.