Traditional payments avenues have run parallel with that of crypto in the last few years. However, finding a successful crossroads between the two worlds has been a challenge. One firm that previously looked to find a way to merge the offerings was Stripe, the global payments firm, though it was unsuccessful. In 2024, it is giving it another shot. We reached out to the industry to find out the knock-on effect this would have on both the payments and crypto world.
Bitcoin was in its relative nascency when Stripe originally looked to get involved in cryptocurrency. In 2014, Stripe announced that it was trialling Bitcoin payments with a select number of users, making it one of the first payment companies in the world to integrate the alternative payment method. However, four years later, Stripe pulled the plug on the offering following consumers’ changing attitudes. Cryptocurrency, specifically Bitcoin, was being treated as an ‘asset’ rather than a currency to make payments with.
In 2017, Bitcoin started the year worth between $1,000 and $1,200. However, a strong Q4 resulted in the crypto’s value flying, hitting highs of $19,000. This meteoric rise perked the ears of many traders looking to make some money quickly, but made the crypto an unstable payment option. As a result, in early 2018, Stripe announced it was no longer going to support crypto payments.
Four years later, in 2022, the payments company saw potential in the crypto though. It announced a fiat-to-crypto payments project which would result in a seamless checkout experience, optimised for conversion, allowing for instant settlement of crypto. It enabled crypto payouts, but not payments. Stripe expanded its partnerships with crypto companies, offering more support for crypto payouts to 67 countries. In turn, this enabled companies to send USDC payments to people and businesses across the world.
Now in 2024, Stripe is building upon its crypto service once more.
It is back offering USDC stablecoin payments on Ethereum, Solana and Polygon.
Impact on the payments market
When a large player in an industry makes a move like this, it sets a precedent. Noting the impact this will have on the payments market, Sankar Krishnan, executive vice-president, banking and capital markets at Capgemini, the digital transformation provider said: “It is clear that Stripe wants to be the global platform supporting all payment types, including ‘coins’ and ‘tokens’ given that they are here to stay.
“It is wonderful to see the Stripe platform evolving, enabling crypto companies to utilise Stripe for both fiat and crypto payments, starting with USDC. This development allows users, sellers, and creators to send USDC today and potentially other cryptocurrencies in the future. We are seeing other industry players already moving in the same direction. PayPal has already introduced options to send and receive crypto from eligible accounts.
“However, given the recent federal scrutiny of Square’s crypto transactions, it will take some time for others to come on board without stringent AML and KYC rules established to detect ‘bad actors’. In contrast, Adyen remains strategically focused on becoming the world’s best end-to-end payments chain with better user experience, without venturing into crypto in 2024.”
Stablecoins are a different offering
While Stripe is moving back into the world of crypto, this offer differs massively from the payment solution in 2018. Stablecoins are pegged to a currency making them a lot less volatile than another crypto like Bitcoin.
Noting how this move is a step in the right direction, but a long way from full blown crypto support, Michael Lewis, a partner and head of the firm’s UK financial regulation team at Womble Bond Dickinson, the law firm, said: “Stripe’s decision to re-introduce the ability to make crypto payments, this time with stablecoin, is likely to encourage other payment providers to review their use of crypto but it’s far from Stripe’s original foray into crypto payments.
“We’re moving to a position where businesses, consumers and regulators alike differentiate between ‘safe’ and ‘risky’ crypto.
“What’s increasingly thought of as ‘safe’ is fiat-backed stable coins, and we’re seeing governments starting initiatives to encourage and regulate their use as a form of payment. In the UK, for example, the government is taking a phased approach to regulation of crypto-activities within the financial regulatory framework, and its first phase is to introduce a regime for regulation of both use of fiat-backed coins in payment chains and of firms that issue and undertake custody activities in relation to them.”
A step in the right direction
Stripe’s adoption and support of crypto is massive step forward in the digital asset’s question for mass adoption explains Daniel Seely, senior associate and cryptocurrency specialist at national law firm Freeths.
“Having a well-known name behind it such as Stripe will likely help the industry’s reputation in the business world as being a serious proposition and payments tool. Whilst the extent of market demand likely remains to be seen, the fact that Stripe has made this decision suggests that there is ultimately a pent-up demand for the use of crypto within payment systems, and so provided Stripe makes a success of it then it seems inevitable that competitors will follow in time.
“There will, however, likely be a period of legal and regulatory ‘catch up’ in the coming months and years, and so it remains to be seen whether Stripe’s model and use of crypto will set the benchmark for how other businesses use it, or whether modifications to these processes will be required by law in time. Nevertheless, for the crypto industry as a whole this news will be seen as a welcome development.”
Looking to the future
Tim Grant, CEO at Deus X Capital, the firm working towards a fairer, more transparent ecosystem, notes the journey for Stripe in crypto is still at the start. However, in making this move, millions of crypto holders will now have access to make payments on the network.
“There’s clearly a long way to go when it comes to crypto payments becoming truly mainstream. It’s hard to predict how the traditional payments networks will be affected but we don’t see significant changes in the short to medium term. We do, however, see this announcement from Stripe as a catalyst for the industry to focus more on how it can use the powerful toolset that the new digital asset paradigm provides in evolving traditional payments.
“Given that USDC is one of the most significant mechanisms for crypto traders to engage the markets, and that it is trivial to exchange USDC for other crypto assets, the USDC step alone is quite meaningful in terms of allowing millions of crypto holders to make payments over the Stripe network.”
Francis Bignell
