BitPay to Settle Bitcoin Payments to New Stablecoins
Crypto payment processor BitPay has announced it will be allowing settlements in two new stablecoins: Gemini Dollars and Circle’s USD Coin. The move allows merchants to avoid the volatility of Bitcoin without having to convert to fiat.
Also see: As Cryptos Surge, Tether Is In Free Fall
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Good News for Merchants Without Access to Fiat Settlement
BitPay, which allows merchants to accept bitcoin and bitcoin cash as payments, made the announcement on its blog on October 15th. In 38 countries, primarily in Europe but also in North America, Africa, and Australasia, BitPay will convert bitcoin into the local fiat currency at the time of sale. From there the money can be transferred directly into a merchant’s bank account.
Bitcoin and other cryptocurrencies are notably volatile and merchants holding them risk that their value against fiat currencies will decline substantially, with little notice.
This risk falls primarily on BitPay merchants who are not in one of the countries that supports settlement into fiat, which are primarily in South America and Asia.
Stablecoins Offer Certainty To Merchants Without Bank Accounts
For those merchants, the new stablecoin conversion service will allow them to accept bitcoin payments and then settle directly into either Gemini Dollar (GUSD) or Circle USD Coin (USDC), both of which are stablecoins pegged to the U.S. dollar. From there, a merchant could trade the chosen stablecoin for their preferred fiat currency on a local cryptocurrency exchange.
It should be noted, however, that settling into GUSD or USDC doesn’t remove the risk of currency fluctuation entirely for merchants, as they will still face the risk that their local fiat currency could devalue against the U.S. dollar. But generally, the greenback is a much more stable currency that bitcoin, or any other cryptocurrency.
New Stablecoins Gaining Acceptance (Except Tether)
BitPay’s adoption of GUSD and USDC, both of which were only just released in the past month or so, shows the utility that stablecoins have for businesses dealing with crypto. By removing the risk of losing value due to volatility, they eliminate the need to settle crypto payments in fiat immediately.
The move by BitPay also appears to demonstrate the pent-up demand for an alternative to Tether (USDT). As Bitsonline reported yesterday, Tether plunged against the dollar, falling as low as 87 cents on some exchanges, though most exchanges had it bottoming out above that.
As some have speculated, the release of new stablecoins in recent months may be leading to the abandonment of Tether, which, along with associated exchange Bitfinex, has been the subject of controversy for months on end. This year, there have been no fewer than six stablecoins that have either been announced or released.
New Competitors Charging Into the Battlefield
These include the aforementioned Gemini Dollar and Circle USD Coin, as well as Paxos Standard, GMO Japanese Yen, and Binance-back Terra. The IBM-backed Stronghold USD was launched in July, while MakerDAO’s MKR stablecoin was funded to the tune of $15 million USD by venture capital firm Andreessen Horowitz just a few weeks ago.
Further, TrueUSD was launched back in January. Amusingly (or alarmingly), it began trading by as much as 40 percent above the 1:1 dollar peg it was supposed to maintain after Binance announced it would be listing it.
That incident demonstrates the difficulties in keeping stablecoins stable, and perhaps also proving the wisdom of 19th century Prussian military officer Helmuth Karl Bernhard Graf von Moltke, who is quoted as saying, “No battle plan ever survives first contact with the enemy”.
Have you say. What impact will BitPay’s adoption of stablecoins have? Are stablecoins getting too much attention right now, or it is deserved?
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