Where are cryptocurrencies used as payment methode ?
Without focusing on the speculative values of cryptocurrencies for the moment, it is interesting to understand the different applications around these new technologies, and to answer one of the first questions that comes to mind: payment in cryptocurrencies. will it be democratized one day in our societies? A currency, in order to be considered as such, must be able to be used in the exchange of goods and services. At a time of expansionary monetary policies, in which the quantity of money issued increases continuously, the store of value function is strongly called into question by the inflation induced by these policies. One of the technological revolutions of recent years, which has been widely discussed in the press over the past year, is the appearance of cryptocurrencies. Are they on the way to replacing our fiduciary currencies in payment transactions and in their role as a store of value?
Cryptocurrencies, a potential means of payment offering many advantages
A cryptocurrency is a cryptographically secure digital currency that relies on the use of a replicated and distributed ledger among all network players. This ledger is called “Blockchain” and its purpose is to validate and record transactions, giving them security, transparency and immutability. Any transaction carried out by cryptocurrency corresponds to a transfer of funds between two virtual wallets, recorded in this public ledger and justified by the encrypted electronic signatures of said wallets. Cryptocurrency is also a means of exchange between individuals without the intervention of a third party, and therefore, a fortiori, without the intervention of the central bank or the state. A major difference between cryptocurrencies and so-called “classic” fiduciary currencies is that the former are controlled directly by individuals and secured by private keys that supplement the role played by banks for traditional currencies. This disintermediation is also a source of immutability, a cryptocurrency transaction, after initiation, cannot be blocked or modified as can be the case with banks.
The advantages of paying in cryptocurrency are multiple:
- The absence of an intermediary. States, banks, and other financial intermediaries have no means of influencing a transaction.
- The absence of exchange fees. The fees for a transaction made in cryptocurrency are low and more transparent.
- All you need is internet access to make a transaction – no need to go to a bank.
- It is possible to carry out transactions in complete confidentiality. For example, Venezuela announced in 2017 the creation of a "Petro" cryptocurrency, the value of which is indexed to the price of a barrel of oil. The latter allows the country to finance its deficit by circumventing the financing restrictions imposed by the United States, the notion of confidentiality making it possible to convince a wider panel of investors.
State of play of the current use of cryptocurrencies as a means of payment
Today, more than 100,000 legal websites around the world accept cryptocurrencies as a means of payment. However, this adoption of cryptocurrencies as a means of payment is not at the same stage depending on the geographical region. According to our research, users are mainly concentrated in North America, Europe and Southeast Asia (China, Japan and Indonesia). Other regions of the world nevertheless remain very active, led by Central America (Colombia and Venezuela), South America (Brazil and Argentina) and Africa (Kenya and South Africa). Faced with these challenges, Sia Partners met the founders of two new entrants aiming to democratize the use of cryptocurrencies as a means of payment: Unikeys and PundiX, established in Asia. Unikeys and PundiX provide payment software capable of accepting cryptocurrency transactions. Thanks to their value proposition, the two players allow merchants to accept cryptocurrencies as a means of payment and thus make the use of cryptocurrencies accessible in the legal economy.
Both also offer to instantly convert cryptocurrency to fiat currency. This is what they are trying to do by offering an online trading service integrated into the POS (Point-Of-Sale) provided to traders, thus reducing one of the obstacles to the use of cryptocurrencies as a means of payment. However, for a currency, whatever it is, to be stable and conserved, the people who hold it must be encouraged not to systematically convert it. This work of evangelization, PundiX and Unikeys do it via their news, their participation in events around the blockchain and cryptocurrency but also via the organization of major events affecting young people – more apt to adopt new technologies (“ early adopters”).
What actions should be taken for effective democratization ?
Two main obstacles to the democratization of cryptocurrencies are the lack of regulation on the one hand, and the lack of communication and evangelization on technologies and possible uses on the other hand. As a result, most cryptocurrency holders are still working for the sole purpose of speculation. The impact of these two main obstacles thus prevents the realization of the “Chasm” phenomenon, introduced by Geoffrey Moore in 1991. This phenomenon illustrates the democratization of technologies in general: the transition from “early adopters” to the “early majority”. This passage is essential because it is at this moment that the innovation leaves its niche market to enter the mass market.
What are the conditions for moving from “early adopters” to “early majority”? “Enthusiastic techs” and “early adopters” are very sensitive to innovation. To convince the “early majority”, you have to offer them added values: - Use value, simplicity - Product quality, durability, reliability, - A tested product (favorable opinion of the first users)
In addition, clear regulations, simplicity in the exchange and evangelization work would make it possible to contribute effectively to the triggering of the expected “Chasm”. The European Banking Authority (EBA) continues to regularly issue warnings on the risk of loss in the event of investment in virtual currencies, which is not to facilitate the transition to the “early majority”. However, it should be noted that some initiatives are beginning to take place, allowing the gradual emergence of a framework that could in turn foster trust and then democratization. In France, one thinks in particular of article 26 of the Pact law on ICOs authorizing the AMF to issue a visa to players who wish to issue tokens intended for the French market, for the financing of a project or activity. This measure is coupled with the "right to a specific account", allowing project leaders who have received the AMF label and who have not been able to open a bank account, to call on the Caisse des Dépôts et des Consignation (CDC) to speed up the process.
Finally, for cryptocurrencies to be used more as a means of payment, it would be necessary to: - Greater price stabilization to restore the confidence of cryptocurrency holders – both buyer and seller. Investing in cryptocurrencies should no longer be for its price and its speculation, but for the advantages linked to its use (as a means of payment or otherwise). - A binding and clear legal framework in its use, its investment and its course. - An ever-increasing evangelization from traditional players (banks) and new entrants (including PundiX and Unikeys). Han Zhang