By Cynthia Corzo
Cryptocurrency is evolving from a niche investment or trading fad into the mainstream of global business – a hedge against inflation, currency fluctuations and other financial instability, to ease trade issues and to move money across boundaries without a national banking policy.
One area where crypto is quickly becoming a driving force is in the economy of the metaverse, a fully decentralized digital reality world where all financial transactions – including buying virtual plots of land, developing virtual buildings, creating virtual businesses, and purchasing virtual products and non-fungible tokens (NFTs) – can only be conducted in cryptocurrencies. Retailers like Walmart and Amazon and banks like JP Morgan have already announced their presence in the metaverse.
Some retailers, including movie theaters, an electronics retailer and a coffee chain, have partnered with third-party crypto payment processing companies – which charge very high transaction fees – to accept cryptocurrencies as payment using various formats. In some cases, customers use an app that converts the crypto into U.S. dollars or other country currencies to use for purchases. In others, customers deposit the crypto into an app that converts the crypto into dollars at the time of purchase and generates a flexcode, which is scanned at the register to pay the merchant. Visa offers a crypto-linked credit card, and PayPal users can use their cryptocurrency holdings to pay for certain purchases.
"The crypto space can completely change if big companies accept cryptocurrency directly as a form of payment, not via intermediaries, resellers or a browser plug-in, or start adopting it in mainstream financial transactions," said Pouyan Esmaeil Zadeh, assistant professor of information systems and business analytics at FIU Business.
"My prediction is that if one big name like Amazon or Walmart this year or next year announces they will accept crypto directly, the price will jump incredibly."
Cryptocurrencies are decentralized (not funded by banks) digital currencies that can be used to buy and sell products. Each transaction made with a cryptocurrency is processed, verified and recorded on a virtual ledger known as a blockchain. Bitcoin, the world's largest cryptocurrency, launched in 2009.
At the close of 2021 there were 295 million crypto users globally, and forecasts call for more than 1 billion users holding cryptocurrency by the end of 2022.
"Crypto is becoming more ubiquitous every day," said Andrew Barnard (BBA '08), co-founder of Miami-based Bitstop, a pioneer in bitcoin ATM networks. "It's a tool for people to save in or invest in long term, a mechanism to facilitate cross-border payments between different countries, buy goods and services online [and] make micropayments more easily than with a credit card."
Crypto is highly volatile, impacted by a lack of regulation and concerns about investor protection, fraud and money laundering.
Cryptocurrencies Bitcoin and Ethereum kicked off 2022 at one of their lowest levels and the sell-off gained momentum in mid-January.
Bitcoin lost 6.6% and fell below the $34,000 mark after reaching an all-time high of $68,990 in November 2021. Ethereum dropped 7.6% to $2,201, the lowest since July 2021.
Hemang Subramanian, associate professor of information systems and business analytics at FIU Business, explained that the crash wasn't a surprise.
"People were investing free money that was coming in, surplus from one more round of government subsidies, refunds from the IRS or hedge funds," said Subramanian. "Then they say hold on for dear life (HODL, a popular crypto investor term). These are general cycles that happen in the market."
Crypto prices began to rally in early February as investors regained their confidence. On February 8, Bitcoin was up 1.8% to $43,498, while Ethereum was up 2.6% to $3,096.
Some compare bitcoin to gold, an asset that you hold as a long-term investment.
"[The] key is to learn how to store it and hold it for the long term. One day it's going to save the day when you need it," said Barnard. "The bigger risk is not owning anything – 1% to 3% or 5% of your portfolio – because you don't want to be on the wrong side of history if this does work out."
Mayors from leading cities and some small towns across the U.S. are incorporating crypto into their local governments in an effort to raise money for public projects, tackle inflation and create new revenue streams.
Miami Mayor Francis Suarez (BBA '01) has zeroed in on making the city a crypto hub, drawing established companies to set up headquarters in Miami. He pledged to take one paycheck in bitcoin. Also, the city has established its own cryptocurrency, MiamiCoin.
In early February 2022, Miami received $5.25 million, a donation from CityCoin, a cryptocurrency project that created MiamiCoin.
Esmaeil Zadeh pointed out that initiatives like MiamiCoin can be a good source of revenue for the city as 30% of the mining rewards are allocated to the municipality. Crypto mining uses computer code to create new digital currencies, record and validate the digital transactions, and to develop and maintain the blockchain's ledger. While the financial return of MiamiCoin, and other CityCoins, increases as more people purchase it, those dividends fluctuate as crypto prices rise and fall. MiamiCoin lost approximately 70% of its value from early November 2021 to early February 2022.
While retailers are activating or strategizing their crypto expansion, experts agree that brick-and-mortar stores will be the last ones to accept crypto at the cash register – cash and debit or credit cards will remain the norm.
Via a Broker or Crypto Exchange
At a Bitcoin ATM
Armed with a crypto wallet, or using cryptofunded debit or gift cards, you can spend cryptocurrency on pretty much anything at the merchants that accept it. An online transaction typically involves going to the wallet's "send" option, entering the wallet address or email address of the recipient, selecting which cryptocurrency you would like to use, adding the amount into the payment box and, lastly, clicking "send." Inside a retailer or other establishment, making a purchase with cryptocurrency typically requires the use of a crypto processing app or payment program. These deduct the amount in the selected cryptocurrency from the user's digital wallet and convert it into legal currency before paying the merchant.