Expert: Crypto a threat to traditional payments

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Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO of FXcompared and has 18 years of experience in the international finance world focusing on cross-border payments, technology and the property sectors. Daniel is widely… Read more
  • Banks and other financial institutions are advised to watch cryptos because they are going to change commerce sooner or later
  • MoffettNathanson analyst Lisa Ellis says that this is not a one for the other scenario as incumbent systems and blockchain can coexist
  • While cryptos can be used to bridge currency for international money transfers, the sector still lacks the necessary tools to prevent price manipulation, other experts note


The idea that cryptocurrencies will push fiat money and incumbent payment systems aside is described as ludicrous by crypto sceptics, but it might happen sooner than expected. According to MoffettNathanson analyst Lisa Ellis, the cryptocurrency market is “worth watching” and that naysayers shouldn’t dismiss it as a farfetched idea.

With payments processors now using Ripple’s XRP to transfer money internationally because of the huge amount of money they will save, cryptocurrency’s potential to disrupt the market is high. This is despite the fact that the sector is still dealing with regulatory problems. Fintech observers note that Ripple is not the only company benefiting from this development as more banks are now developing their own tokens so they can offer better overseas transfer rates to their clients. However, the market does not need to choose one over the other, Ellis explains.

Crypto and blockchain aficionados want their own system to dethrone the old one but Ellis notes that it doesn’t have to be that way. She says that “cryptocurrencies and blockchain present opportunities to Visa, Mastercard and PayPal in addition to these risks”.

The sector is evolving rapidly, Ellis wrote in her research titled “V, MA, PYPL: Not Imminent, but Worth Watching — the Risk of Disruption from Cryptocurrencies and Blockchain”. Ellis notes that the coins are not a fad.

“We believe the ‘existential’ threat of cryptocurrency systems is unlikely to occur soon, as bitcoin (and other cryptocurrency systems) still face several shortcomings compared to the current private payment systems”, Ellis told reporters on Wednesday. “However, we believe this ‘existential’ threat — as ludicrous as it may sound (why would I ever buy a coffee with bitcoin?) — bears watching, as progress is steadily being made to address these shortcomings.”

A part of Ellis’ analysis made the news last week when she said that cryptocurrency and blockchain are the future of payments. She commented, however, that cryptos require a tuneup and that it will take time before the sector actually reaches its big bang moment. For now, Visa, Mastercard, and PayPal are still the dominant players in the payments processing business.

In November 2018, a Forbes article noted that cryptocurrency is an unprotected mechanism of exchange. It has no central bank and regulations are not yet in place.

According to the article, crypto is not backed by gold like older systems and those who have said currencies will need to find places that accept it for the former to use it. It’s like PayPal, Visa, and Mastercard without the backing of paper currencies and without much reach. The underlying reason for its “failure” is the lack of regulation that has the power to expand or limit supply. Cryptocurrency, Forbes contributors add, has no mechanism in place to prevent price manipulation.

While cryptocurrencies are a good bridge for foreign exchange, naysayers say that it is not a good idea to use it as a currency for now. Observers note that time will tell as to the future of cryptos in the payments market and that Ellis is right to say that it is indeed worth watching.

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