[NEW YORK] Coinbase Global is launching a platform designed to make stablecoins a go-to payment method for online transactions, a potentially big leap forward in the mainstream adoption of cryptocurrencies meant to track the US dollar.
The announcement follows the passage of landmark stablecoin legislation in the US Senate on Tuesday (Jun 17) and comes as large retailers have expressed interest in exploring stablecoins for use as payments in online transactions, a roughly US$6 trillion industry. Such use of this type of cryptocurrency threatens to circumvent card networks Visa and Mastercard, and other online payment services.
“We built the new system to mimic credit-card rails so it slots into existing flows with zero disruption,” a Coinbase spokesperson said.
Coinbase Payments is targeting online platforms such as Shopify and eBay, a prized client segment among payment processors since the websites provide distribution to thousands of small-to-medium sized businesses who are often looking for ways to avoid the fees associated with accepting card payments. Today, Coinbase makes most of its money through transaction fees on the exchange’s cryptocurrency trades. The payments initiative could help add new sources of revenue, according to Mark Palmer, analyst at Benchmark.
“This sort of initiative, where the company is creating a new revenue stream, diversifying beyond transaction volume as the primary means of driving revenue, is very important from a long-term standpoint,” Palmer said.
Coinbase’s inaugural client is Shopify, which is partnering with Coinbase and Stripe Inc. to allow merchants on their platform to accept Circle’s USDC over the exchange’s Base network, a so-called Layer 2 blockchain built on Ethereum. Coinbase’s new payments service is promising e-commerce platforms faster settlement, lower fees and immediate access to a global customer base. Earlier this week, JPMorgan Chase announced it will launch a pilot for tokenised US dollar deposits called JPMD on the Base chain.
The Coinbase payments products include a checkout suite to help consumers easily pay from a crypto wallet provided by Coinbase Wallet, MetaMask or Phantom, among others. Stripe recently announced plans to acquire Privy, which helps merchants embed crypto wallets into their websites. That allows them to accept stablecoin payments without requiring customers to exit to a third-party site to set up a wallet, which adds friction to the buying experience and lowers the chance of a customer completing their purchase.
Another feature of Coinbase’s platform is a connectivity layer for merchants and payment service providers, which helps authorise transactions, handle refunds and manage subscriptions. The third piece is a payments protocol which helps merchants execute transactions on the blockchain. The product suite is designed to help merchants and online platforms integrate stablecoin payments without requiring expertise in blockchain or cryptocurrencies.
Separately, Coinbase said it has inked a deal to allow USDC to be used as collateral in US futures trading. Coinbase Derivatives is partnering with clearing house Nodal Clear to work with regulators on what it expects to be the first regulated use of USDC as collateral, according to an announcement on Coinbase’s website. BLOOMBERG
