This is the second of a two-part series entitled “Money Makeover” which examines the changing role of money and how cryptocurrencies fit into the new world of finance.
Bitcoin was conceived in 2009 as an “electronic cash system.”
Today, some people would say it has failed to live up to its goal. What cannot be denied, however, is that Bitcoin has helped change (again) our way of thinking about money.
In stark contrast to the US dollar – or even the euro, which once seemed revolutionary itself – Bitcoin has a programmatically-enforced deflationary monetary policy, without a central issuer and without the restriction of national borders.
And as the world re-examines the workings of finance after covid-19, Bitcoin and cryptocurrencies are leading us to re-imagine the role and meaning of money – and most importantly, how people use it.
Trying and trusting
The rise of cryptocurrencies comes at a time of great “unbundling.” Fintechs such as Revolut, N26, Monzo and Robinhood have made it easy to do many “banking-like things” from the convenience of a smartphone.
Now many of the core processes of a traditional bank are open to many different players. With the addition of blockchain technology, these processes can be carried out even more efficiently, making depositing, lending and payments much easier and cheaper than they were before.
At the same time, some forward-thinking companies have realized the need to embrace this shift in trust and to open things up themselves. The traditional payment industry is one sector that has recognized the transformational potential that cryptocurrencies have especially towards their existing business model.
The rise of cryptocurrencies comes at a time of great unbundling.
Denis SchellerSenior Manager Crypto Payments
Bitcoin Suisse and Worldline Global, the 4th largest payment acquirer globally with 1m merchants in its network, are cooperating to enable the acceptance of crypto payments for point-of-sale (POS) and e-commerce payments across Wordline’s Swiss base of 85’000 merchants.
On the international level, payment companies such as Paypal (more than 346m customers and 26m merchant locations), Visa (46m+ merchant locations) or Mastercard (37m merchant locations) have publicly announced their support for cryptocurrencies and have committed to make them accessible to their customer and merchant base. Thanks to their pioneering work, customers will have a choice to pay in USD, EUR, CHF or in cryptocurrencies. In this way, they are proving that crypto payments are no longer a niche phenomenon but will soon take a more prominent role in society.
But it is not just private companies which are opening their minds to “new money.”
Government entities and national institutions are also considering the possibilities of cryptocurrencies and their innovation. The Canton of Zug is the first in Switzerland to accept cryptocurrencies (Bitcoin and Ether) as payment for cantonal taxes. Meanwhile, a wide range of central banks, including the Swiss National Bank, are exploring the possibilities of central bank digital currencies (CBDCs) as an alternative to cash and a means of making the financial system more efficient.
Building the Rails
Are cryptocurrencies ready to take over the world of money right away? Maybe, maybe not…
Some challenges (understandably) remain in order to make Bitcoin and cryptocurrencies truly global and available for billions of people around the world.
Critics point to some deficiencies including the limited number of transactions per minute (especially for Bitcoin), high transaction costs and slow transaction time.
But at the same time, they often deliberately ignore the fact that technical solutions already exist to deal with these issues. Let us have a look at the Lightning Network for Bitcoin as an example: the Lightning Network is a highly scalable solution, which enables instant payments at a very low cost and even across blockchains powered by smart contacts. The Lightning Network is capable of millions to billions of transactions per second. This makes it capable of outperforming even legacy payment rails by many orders of magnitude.
Technological progress and innovation embedded in regulatory frameworks can also help generate trust to carry cryptocurrencies even further. New laws such as the recently adopted Swiss DLT (Distributed Ledger Technology) Act and the European initiative “Markets in Crypto Assets” (MiCa) will help harmonize regulation and support mainstream adoption of financial services and crypto payments, based on blockchain technology.
The way forward
Whether we like it or not, money is getting a makeover – right now. But it does not need to be a cause for worry.
Today, more than 20 years after the euro was launched, Europeans have become quite used to using the euro in their everyday lives. Indeed, it is easy to forget that it was once completely new and different – and perhaps even scary – to many of them.
By the time Europe implemented its cash changeover in 2002, just three years after the euro launch, acceptance of the new system had grown significantly.
Likewise, cryptocurrencies also have stronger momentum today than ever before with increasing industry support and a grass root movement that has already trickled down into mainstream society. In many ways, Bitcoin and cryptocurrencies find themselves at the same stage in 2021, that the euro did in 2002.
As acceptance grows, and more and more payment companies and banking institutions acknowledge the potential of crypto payments, Bitcoin Suisse continues to do its part to shape the crypto payments industry and to facilitate access to and usage of cryptocurrencies with our partners.