By Patti Murphy
ProScribes Inc.
I remember when I first began looking into cryptocurrencies. It was 2013 and Bitcoin, which some likened to the Beanie Baby craze, had skyrocketed in price from less than a penny per coin to just under $100 in the space of about three years. The Green Sheet had asked me to look into this phenomenon for an article, so I purchased one Bitcoin to better understand the experience.
I sold the coin when it hit $1,000, and Bitcoin since has swung wildly in value, between a few thousand dollars to more than $60,000. Had I held onto that $100 investment, it would be worth a bundle today. So, I see the appeal of cryptocurrencies as investments. But I don't quite get the appeal of transacting in cryptocurrency.
Yet, if recent headlines are an indication, the mainstreaming of cryptocurrencies is happening. It may not be as commonplace as cash, cards or even checks, but crypto payments are in the cards.
Both Visa and Mastercard are interested in cryptocurrencies. So are fintech disruptors like PayPal. And central banks, too.
In remarks before a crypto conference in May 2021, Federal Reserve Board Governor Lael Brainard said the Fed is "stepping up" research and public discourse on the role of central bank digital currencies (CBDCs)—that is cryptocurrencies backed by the Fed. As a first step, the Fed plans to publish a "discussion paper" this summer that lays out its thinking, with a focus on benefits and risks, she said.
Additionally, the Federal Reserve Bank of Boston is building a hypothetical digital currency platform with help from the Massachusetts Institute of Technology. And the Atlanta and Cleveland Fed Banks are exploring how CBDCs can bolster financial inclusion. About 5 percent of American households are unbanked, according to the Federal Deposit Insurance Corp.; about 20 percent are underbanked.
Brainard explained that the Covid-19 pandemic highlighted the need for broad public access to "well-regulated" digital monies. "The challenges of getting relief payments to [unbanked and underbanked] households highlighted the benefits of delivering payments more quickly, cheaply and seamlessly through digital means," she said.
Expected benefits of a CBDC include eliminating friction in payments clearing and settlement, domestically and across borders, and lower costs. "The introduction of a CBDC may provide an important foundation for beneficial innovation and competition in retail payments in the United States," Brainard said. She was insistent that CBDCs "should complement and not replace currency and bank accounts."
Brainard also said a CBDC would eliminate many of the risks associated with private cryptocurrencies, like Bitcoin, with backing by a central bank. In addition to the Fed, several other central banks (including the Central Bank of China) are considering moves to their own digital currencies.
Meanwhile, Mastercard and Visa are moving to support cryptocurrencies on their settlement platforms. Visa has a pilot going that supports settlement in USD Coin, a stablecoin backed by the U.S. dollar. Mastercard stated it has similar plans in the works.
"Our philosophy on cryptocurrencies is straightforward: it's about choice," Raj Dhamodharan, Mastercard executive vice president for blockchain and digital asset products and partnerships, wrote in a recent blog post. "Mastercard isn't here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want."
PayPal is gung-ho on cryptocurrencies, too. In 2020, the company revealed consumers can use their PayPal accounts to buy, sell and hold four of the most popular cryptocurrencies in increments as low as $1. In March of this year, PayPal introduced Checkout with Crypto, allowing consumers to pay merchants using cryptocurrencies. Checkout with Crypto appears alongside other methods in a consumer's PayPal wallet and can be used when they have sufficient crypto balances. Merchants can accept crypto payments with no additional fees or integrations, PayPal said.
Dan Schulman, PayPal president and CEO, said he sees Checkout with Crypto "driving mainstream adoption of cryptocurrencies." He added that enabling "cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies." 
Patti Murphy is senior editor at The Green Sheet and self-described payments maven of the fourth estate. Follow her on Twitter @GS_PayMaven.
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