Following Coinbase And Stripe Deal, Fiat-To-Crypto Payments Players See Big Future

The future of online payments is leaning a few degrees closer to cryptocurrencies. That doesn’t mean Bitcoin BTC/USD will gain more traction and prices will rise; but some form of digital fiat, like U.S. dollar tether (USDT) or another stable coin, will become a core part of online payment platforms. Companies are building out the technology to make that happen. The Coinbase COIN-Stripe deal shows this market is now wide open for investors.

The venture was announced on June 27 and marries the traditional online payment systems of Stripe with the digital assets market of Coinbase. Their fiat-to-crypto platform will use USD Coin (USDC), which is pegged to the dollar and is a Coinbase-created digital currency. Stripe will now be able to accept USDC as payment.

“I think money will flow much more freely cross borders if enabled by crypto technology behind the scenes,” said Mark Smargon, CEO and Founder of Fuse FUSE/USD. “I don’t see this technology replacing dollar transactions, per se, but I see fiat-to-crypto adding more capabilities to financial service providers and merchants to do what only governments and banks used to be able to do.”

Fuse is building a similar fiat-to-crypto payments platform for blockchains.

“We want to do for Web3 what Stripe has done for Web2,” he said.

For those not used to that lingo, Web2 is the internet as you know it today – more centralized and using the coding language of HTML and Java Script, for example. And Web3 is the blockchain – decentralized and using cryptocurrencies as a baseline for transactions, complete with words only true crypto nerds can explain: terminologies like consensus mechanisms and smart contracts.

Coinbase and Stripe’s foray into the fiat-to-crypto landscape could pull the rug out from the more complicated Web3 players like Fuse. But for now, venture capital likes this market and is invested.

The Blockhain Founders Fund in Singapore and Collider Labs in Israel are both early-stage investors in Fuse, which launched in 2019. Smargon is an established fintech entrepreneur in Israel and has been in the e-commerce game since 2000.

“There are technological hurdles and entry barriers for businesses moving to fiat-to-crypto payments,” he said. “But I think the promise of this technology is not meant only for venture capitalists. I see a clear need for smaller institutions in putting fiat on-chain; there is infinite demand there. When you look at the combination of the internet and payments, we are only scratching the surface of possibilities.”

Smargon said the Fuse network has processed over 160 million transactions since launching.

The Ups & Downs of  Fiat-to-Crypto Payment Coins

Investors in FUSE made big money early, with gains in the token price hitting its all-time high of $2.13 on January 18, 2022. That day marked a gain of 1,878% since its launch in February 2021. It’s been downhill since and is now worth $0.03.

Some of FUSE’s competitors in the fiat-to-crypto payments space include Alchemy Pay (ACH), Stellar (XLM), Ripple (XRP) and Terra (LUNA), which got blown up to the tune of $60 billion in lost market cap in 2022.

Investors will have to decide whether they want to buy on these pretty steep lows, and if they are sold on the Web3 payments story one day competing with Web2 payments.  So far, 2024 has been an ugly year (as of this writing):

FUSE: - 48.32%

ACH: -0.0% (no gain after collapsing from all-time highs in spring)

XLM: -34.62%

XRP: -31.75%

LUNA: - 60%.

And then there is Coinbase. Coinbase stock is up 40.11%, beating BTC’s 27.5% gain so far this year.

The pivotal question is whether these decentralized blockchain fintech markets will one day be on equal footing with traditional finance. Traditional finance is tip-toeing into crypto. They could just take it over, and most of the existing brands would dominate – like Coinbase, or Stripe on the payments side. Companies like Fuse or Ripple could be acquired by a traditional financial services firm, if that company believes Web3 has a future.

For sure, venture capital firms have been launched just to pour money into these Web3 startups, hoping one of them will be the Bitcoin version of PayPal. This is a long play, and it will be hard to pick winners. But for Smargon at Fuse, this is ground-floor investing.

“I think the biggest advantage for cross border payments utilizing this technology is going to be their ability to minimize people’s interest in using all of the multiple intermediaries needed to conduct a traditional cross border transaction,” Smargon said. “This usually requires a large number of players that all take a cut of the transaction. Crypto payments change that. It introduces transparency and trust because you can see exactly where the money is going in real time,” he said. “It’s a game-changer.”

The writer of this article owns Stellar and Bitcoin.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.