One of the longtime fears that the traditional financial world seems to have about cryptocurrency is its potential for overtaking payment systems. People who are comfortable with the archaic system do not want to see a broader market, which is partially due to the lack of faith that they have in cryptocurrency.
However, as the technology behind cryptocurrency and blockchain finds more use cases, the disruption of the current payment system may not be far behind.
Lisa Ellis is an analyst with MoffettNathanson, and she recently was featured in news media outlet Bloomberg’s website for a letter she wrote to clients. The letter stated that she believes that cryptocurrency’s global acceptance could change payment systems.
To be clear, she does not believe that the big names like Visa, Mastercard, and PayPal will be pushed aside anytime soon, but the “ludicrous” idea of crypto replacing is worth exploring.
Cryptocurrency has this unique quality of remaining independent of any specific country, and the way that it has jumped in as a saving grace to many countries suffering from hyperinflation is a reprieve. However, Ellis believes that it is more of a threat to the current payment systems in place with fiat currency.
Ellis said, “Cryptocurrency systems (e.g., Bitcoin, Ethereum, Ripple) are potentially disruptive to private payment systems. Their core design characteristics –- which are aimed at enabling ‘freedom of money’ — are in direct contrast to the characteristics of most traditional, private payment systems.”
More likely than taking over, the aforementioned payment systems could end up being commoditized instead of making them irrelevant, according to Elis.
A greater concern right now is that cross-border payments between two individuals or two companies is being done by payment processes like Ripple and Veem, which leverage cryptocurrency to make the payments fast and easy. It is likely that consumers will continue to turn to these options, “unless networks fully embrace these technologies themselves,” as Ellis says.
It seems that the cryptocurrency sector is not alone in working towards a monopoly on payment processing, because there are even banks that are working to produce options. Perhaps the most popular is JPMorgan Chase, which recently tested the prototype for a digital asset called JPM Coin.
The company has noted that the introduction of blockchain-based asset transfer payments could easily become a reality for institutional clients on their platform.
Ellis turns the conversation towards a more optimistic tone, saying that these cryptocurrencies and blockchain technology options are more of an opportunity, since new revenue streams would open. Blockchain technology’s tracking abilities could work with the authentication protocols of the traditional network, but only time will tell if any traditional institutions take on this option.
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