Morgan Stanley Crypto Strategist Sees “Cycle of Increasing Stability and Popularity” in Cryptocurrencies | 05/02/22

The volatility of cryptocurrencies has made it difficult to use them as a means of payment in daily transactions.

Cycle with increasing stability and popularity
• Can you pay tax in Bitcoin?
• Cryptocurrencies as a means of payment for groceries

In the Morgan Stanley podcast “Thoughts on the Market”, Sheena Shah, senior crypto strategist at Morgan Stanley Research, notes that as businesses and consumers become more interested in using cryptocurrencies for transactions, “a cycle of increasing stability and popularity began”. But the question is how long the cycle will last. Stability can be achieved if cryptocurrencies are used as a means of payment. Now that bitcoin and other cyber currencies are being accepted as a means of payment in various places, the good cycle has begun.

Daily use of Bitcoin

According to Sheena Shah’s study, the current high transaction costs and the limited number of merchants accepting Bitcoin & Co. as a means of payment, the two major “pushbacks” for cryptocurrencies. But there may soon be movement here.

At the Bitcoin 2022 conference, Jack Mallers, CEO of payment processor Strike, announced a partnership with Shopify. “We are proud to partner with Shopify to offer merchants a cheaper and faster way to accept US dollars using Bitcoin technology,” the businesswire said in a press release. The Lightning network used by Strike enables approximately 1.7 million Shopify resellers to reduce costs and increase transaction speeds. BTC payments are converted to US dollars within the transaction, so that the traders themselves do not face Bitcoin.
Another milestone in Strike’s strategy to expand the spread of Bitcoin in both online business and significant physical retail is the collaboration with the POS provider (point-of-sale) NCR and the payment company Blackhawk Network. This could make it possible to pay with Bitcoin in several US stores and restaurants in the near future, as major chains such as McDonalds and Walmart are among NCR’s customers.

Acceptance and distribution of cryptocurrencies

As an example, Sheena Shah asks the question: “Did you really buy the house with cryptocurrencies, or did you sell your cryptocurrencies for US dollars to buy the house?”. For that is precisely the difference: when cryptocurrencies are used not only as an asset, but also for transactions of daily (and not entirely daily) purchases, volatility decreases and thus increases consumer and corporate confidence in cryptocurrencies. Two factors are linked to this: firstly, the payment process must be simple and inexpensive, and secondly, payment with cryptocurrencies must also be accepted by the state (eg taxes).

Numerous (federal) states pursue their own crypto strategies. El Salvador became the first country to accept Bitcoin as a means of payment in September last year. Other countries could follow, especially emerging and developing countries, as they, like El Salvador, are faced with high costs of cross-border payments. Other examples include Rio de Janeiro, which aims to be the first city in Brazil where taxes can be settled in crypto. The Swiss cities of Zug (“Crypto Valley”) and Lugano are pursuing their own crypto strategies. According to media reports, Lugano wants to become a blockchain center with the help of the company Tether and enable fees, services and goods from both the private sector and the city to be completely in cryptocurrencies. So far, Bitcoin, Tether and stablecoin from the city of Luga have been approved. In the United States, two states, Colorado and Florida, are considering allowing cryptocurrencies for tax payments, despite constitutional headwinds.

There are now over 50 cryptocurrencies issued by companies and exchanges connected to the Visa or MasterCard payment network. With a crypto card, you can already pay anywhere in the world. Visa has been enabling payments with USD Coin stablecoin since March 2021. When transactions were first converted to US dollars and deposited into a bank account, transaction costs were initially relatively high. In the fourth quarter of 2021, Visa processed just under 1% of cryptocurrency transactions, a volume of $ 2.5 billion in a growing market.


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