Fintech

Crypto payments will definitely, maybe, possibly go mainstream in 2022

Consumer and merchant education, regulatory questions and the state of fiat-crypto onramps are still roadblocks.

2022 with 0 as bitcoin

Could 2022 be the year crypto payments become commonplace?

Illustration: Protocol

Click banner image for more holiday coverage for 2021

The crypto industry exploded in 2021, particularly through individuals and institutions investing in digital tokens.

But crypto payments haven't kept pace with the rest of the industry's growth. Since the earliest days of digital cash, making payments easier has been a key promise of the technology. Yet widespread access and adoption are still missing, which places big roadblocks in crypto’s path to the mainstream.

Broadly speaking, crypto insiders differ from tech analysts and investors in their near-term expectations for crypto payments: Enthusiasts and evangelists think 2022 will be the year, while more skeptical outsiders think the technology will continue to disappoint.

Paying by crypto for everyday purchases faces many challenges. Those include the volatility of the most popular coins; a lack of efficient and cost-effective onramps from fiat to crypto; a dearth of consumer-friendly wallets geared to spending, not trading; regulatory questions about stablecoins; the chicken-and-egg problem of simultaneously educating a base of consumers and a wide range of merchants; and a lack of credit card-like incentives, such as reward points or cash-back offers for consumers.

"We're not at the point where crypto is being used as a regular mode of payment," said Urvashi Barooah, principal at Redpoint Ventures. "We're very far from where we can use crypto to pay a restaurant bill. … We're just not there yet."

To be clear, the technology for consumers to pay with crypto and merchants to accept it is already here — in theory. Coinbase enables merchants to accept crypto, either directly or through automatic conversion of crypto to fiat. PayPal offers a similar service for merchants. Both companies also offer consumers the ability to pay in crypto through their consumer apps. When consumers use the PayPal app, the option to pay with crypto shows up if the user holds crypto.

Square — now Block — was early, but didn’t see a big uptake with paying in crypto. It introduced a feature allowing Square sellers to accept bitcoin in 2014. In 2017, CEO Jack Dorsey told Forbes it hadn’t seen meaningful volume, and references to accepting bitcoin with Square no longer appear on Square’s website. Today, users of Block’s Cash App who hold bitcoin can use the “proceeds” of their bitcoin to spend, meaning after it’s converted back to fiat.

Still, more consumers are trying crypto, and those who hold it are interested in being able to use it for payments, said Roy Zhang, group product manager at Coinbase. “They're always asking us, ‘How can I use it more? How can I actually spend it on a day-to-day basis?’” he said. “Over the course of the next year or so, I imagine that growth trend is going to continue and accelerate even further.”

Accepting crypto

Merchants that accept crypto are more interested than consumers because there are no chargebacks or interchange fees with crypto, saving them costs and headaches, whereas credit cards have higher fees and can have chargebacks weeks later, said Sundeep Peechu, general partner at Felicis Ventures. But that doesn't interest consumers, who benefit from the wide acceptance of credit cards and the protections of chargebacks. “Consumers will end up using it if it's beneficial to them — not to save merchants 1%," Peechu said.

Even if crypto payments cost less and were easy to accept, merchants still have concerns about issues such as the privacy of transactions, said Jose Fernandez da Ponte, SVP and GM of Blockchain, Crypto and Digital Currencies at PayPal.

“A payment is not a transaction,” he said. “If you're a merchant, even if there is a stablecoin that does not have the volatility risk, you still have all the things that are associated with payments: refunds, chargebacks and returns, and integration with the payment stack and reporting.”

Crypto incentives now are not clear for mainstream consumers: Many get 2% cash back from a credit card and don’t understand how or why they can get higher returns on their money by using BlockFi or other crypto services. Indeed, it’s more common to see bitcoin rewards for spending fiat than rewards for spending crypto. But crypto incentives will get better and consumers will soon see the benefits, said Walter Hessert, head of strategy at Paxos Global, which issues a stablecoin and provides crypto services for the likes of PayPal, Meta and Mercado Pago.

“You're going to see incentive programs emerge that are going to help accelerate the adoption of what's just an inherently cheaper and more efficient way to settle, which is moving these dollars on the blockchain versus between a bunch of banks and a card network all taking a toll,” Hessert said.

Crypto is also volatile and, in the U.S., taxable, which makes it tricky to convince consumers to spend it when that transaction could generate tax obligations and forego future gains. Felicis’ Peechu said today’s crypto consumers are "buying because an asset will go up, not for payments."

Stablecoins could be a better way for consumers to adopt crypto payments, said Coinbase’s Zhang, since they’re designed to hold their relative value against fiat, not fluctuate.

To address some of the lack of trust or comfort with crypto, apps could use stablecoins as stand-ins for dollars, Hessert said. Consumers could hold fiat dollars that are converted to pay in crypto, or they could hold stablecoins that look just like dollars.

But there’s another hitch: Many popular DeFi lending programs currently promise a high yield on stablecoins, which is another disincentive to spend the tokens.

And all this assumes that stablecoins have ample, trusted reserves to back their fiat peg — an issue regulators and other observers are increasingly scrutinizing.

In addition, many stablecoins have limitations in terms of scalability or are built on Ethereum’s ERC-20 standard, which is not cheap and not fast enough to make them suitable for payments, PayPal’s da Ponte said. “I don't think that we have seen a stablecoin that works well for payments yet,” he said.

One more roadblock to crypto payments is that the onramps from fiat to crypto are still not robust yet, Redpoint’s Barooah said. Conversions are still not easy enough and there are compliance issues, so banks sometimes reject transactions, she added.

The crucial wallet

One key to winning the battle to own crypto payments is the consumer wallet, Peechu said. "Whoever owns the wallets wins this game," he said. "Like the browser was the gateway product to the front page — Google, Yahoo in the early days — wallets are the way to access Web3 infrastructure being built."

In this scenario, any website or crypto project you go to will accept a wallet that holds your crypto, NFTs and identity credentials. This includes the ability to access certain privileges or enter places or environments through holding NFTs or tokens. Payments are a natural to accompany those identity features. Coinbase appears to be moving in this direction with its recent metaverse announcement.

The problem now is that many wallets and other crypto products are still too complex and not built for mainstream users, Peechu said. "We're a little further away from a true 'aha moment' of onboarding hundreds of millions of users who are not technically savvy," he said.

There are other ways mass consumer adoption could happen beyond crypto wallets, such as messaging apps or other payments apps, said Paxos’ Hessert.

A company with a massive user base could turn on crypto payments and instantly have crypto wallets for millions of users to use for peer-to-peer payments or business payments. One company that intended to launch a cryptocurrency to enable payments, Telegram, shut down its crypto efforts last year.

Longer term, real network effects that will help crypto grow require products that allow people to transact directly in crypto, said PayPal’s da Ponte, who expects crypto payments to take off in 2022 as better payment integrations, better stablecoins and clearer regulation all roll out. “The true promise of crypto for payments is that you can arrive at fundamentally new payment rails and for those fundamentally new payment rails, you should be able to stay on the protocol on the blockchain.”

Workplace

You need a healthy ‘debate culture’

From their first day, employees at Appian are encouraged to disagree with anyone at the company — including the CEO. Here’s how it works.

Appian co-founder and CEO Matt Calkins wants his employees to disagree with him.

Photo: Appian

Matt Calkins often hears that he’s polite, even deferential. But as CEO of Appian, he tells employees to challenge each other — especially their bosses — early and often.

“I love arguments. I love ideas clashing,” Calkins said. “I regard it as a personal compliment when someone respectfully dissents.”

Keep Reading Show less
Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.

Some of the most astounding tech-enabled advances of the next decade, from cutting-edge medical research to urban traffic control and factory floor optimization, will be enabled by a device often smaller than a thumbnail: the memory chip.

While vast amounts of data are created, stored and processed every moment — by some estimates, 2.5 quintillion bytes daily — the insights in that code are unlocked by the memory chips that hold it and transfer it. “Memory will propel the next 10 years into the most transformative years in human history,” said Sanjay Mehrotra, president and CEO of Micron Technology.

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.

Gopuff says it will make it through the fast-delivery slump

Maria Renz on her new role, the state of fast delivery and Gopuff’s goals for the coming year.

Gopuff has raised $4 billion at a $15 billion valuation.

Photo: Gopuff

The fast-delivery boom sent startups soaring during the pandemic, only for them to come crashing down in recent months. But Maria Renz said Gopuff is prepared to get through the slump.

“Gopuff is really well-positioned to weather through those challenges that we expect in the next year or so,” Renz told Protocol. “We're first party, we control elements of our mix, like price, very directly. And again, we have nine years of experience.”

Keep Reading Show less
Sarah Roach

Sarah (Sarahroach_) writes for Source Code at Protocol. She's a recent graduate of The George Washington University, where she studied journalism and criminal justice. She served for two years as editor-in-chief of GW's independent newspaper, The GW Hatchet. Sarah is based in New York, and can be reached at sroach@protocol.com

Enterprise

AT&T CTO: Challenges of the cloud transition are interpersonal

Jeremy Legg sat down with Protocol to discuss the race to 5G, the challenges of the cloud transition and nabbing tech talent.

AT&T CTO Jeremy Legg spoke with Protocol about the company's cloud transition and more.

Photo: AT&T

Jeremy Legg is two months into his role as CTO of AT&T, and he has been tasked with a big mandate: transforming the company into a software-driven business, with 5G and fiber as core growth areas.

This isn’t Legg’s first CTO gig, just his biggest one. He’s an entertainment biz guy who’s now at the center of the much bigger, albeit less glamorous, telecom business. Prior to joining AT&T in 2020, Legg was the CTO of WarnerMedia, where he was the technical architect behind HBO Max.

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Workplace

How Canva uses Canva

Design tips and tricks from the ultimate Canva pros: Canva employees themselves.

Employees use Canva to build the internal weekly “Canvazine,” product vision decks, team swag and more.

Illustration: Christopher T. Fong/Protocol

Ever wondered how the companies behind your favorite tech use their own products? We’ve told you how Spotify uses Spotify, How Slack uses Slack and how Meta uses its workplace tools. We talked to Canva employees about the creative ways they use the design tool.

The thing about Canva is that it's ridiculously easy to use. Anyone, regardless of skill level, can open up the app and produce a visually appealing presentation, infographic or video. The 10-year-old company has become synonymous with DIY design, serving as the preferred Instagram infographic app for the social justice “girlies.” Still, the app has plenty of overlooked features that Canvanauts (Canva’s word for its employees) use every day.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Latest Stories
Bulletins