The launch of the ProShares and Valkyrie Bitcoin ETFs and of the Novi wallet are important steps towards linking cryptocurrency and traditional markets, but for retail crypto investors, the crypto-fiat barrier remains difficult to cross.
It has taken more than twelve years and a market cap of $2.5 trillion for crypto to win a place among legitimate financial assets. On October 19, ProShares Bitcoin Strategy ETF began trading on NYSE, followed by the Valkyrie ETF on Nasdaq on October 22, effectively putting Bitcoin on par with other assets traded as ETFs, such as gold and S&P 500.
However, getting legitimized in the financial markets thanks to the ETFs is one thing, but becoming a legitimate form of money is quite another. Crypto will remain too niche of an asset for most retail investors unless converting it into fiat and vice versa becomes seamless. It’s worth looking at several ongoing initiatives, from Facebook’s Novi to Exscudo’s FinTap, to see how close crypto is to going mainstream.
Why Novi wallet is not the solution to the fiat-crypto problem
Few blockchain projects have been discussed and anticipated as much as the Facebook-backed Diem blockchain (former Libra). Once launched, it should enable Facebook, Messenger, and Whatsapp users to make in-app cryptocurrency payments.
The implications are enormous. Over 3 billion people use Facebook products: if just 10% of them were to start using crypto for payments and transfers, crypto adoption would explode.
After a long wait and a lot of regulatory hurdles, the Novi wallet, designed to be used with Diem, was launched as a pilot in the US and Guatemala on October 19, 2021. But to those who expected a full-scale wallet running on Diem and with support for a new native stablecoin and perhaps fiat, Novi may come as a disappointment.
Paxos dollar instead of Diem stablecoin
The good news first: Novi doesn’t charge any fees for sending money within the network, and transactions are processed almost instantly. It should also be free to convert the crypto stored in Novi into local fiat currency, either in cash or via a bank transfer. The wallet can be topped up with USDP using a credit or debit card.
The flip side is that Novi supports just one cryptocurrency: the Paxos dollar (PAX), an ERC-20 token minted by Paxos. At some point, it should migrate to the Diem blockchain, but so far the long-awaited native stablecoin hasn’t received regulatory approval. There are no plans to support BTC, ETH, USDT, BUSD, or any other crypto, either. Moreover, you can’t send USDP to Novi from another crypto wallet, such as MetaMask, Jaxx, Bread, Abra, etc.
It’s also not clear how Novi will calculate the exchange rate, how large the spread will be, and when it will create fiat on-off ramps for converting USDP into cash, especially in Guatemala.
The website stresses that Novi is ‘just getting started’, but in its present form it’s a mono-currency wallet that can’t be topped up on the blockchain; and as such, it is of limited use to most crypto holders.
FinTap expands support to 10 fiat platforms and 15 blockchains
Exscudo, an Estonia-registered fintech company, has an opposite approach to Diem: its FinTap wallet offers 600 ways to convert between 50+ cryptocurrencies and 3 fiat currencies (USD, EUR, and RUB). The set of supported assets will soon be greatly expanded thanks to the introduction of P2P swaps.
Instead of working with one or two intermediary fiat ramps like many wallets do, FinTap connects to Excudo’s OTC Exchange Core, which, in turn, is linked to 8 different exchange brokers and liquidity providers. Once the user picks a currency pair (such as DOT/USD or BTC/ETH, for example), the wallet’s algorithm automatically finds the best offer and locks the exchange rate for the duration of the transaction.
FinTap also makes it easy to add or withdraw fiat funds. It supports 10 fiat payment systems, including SEPA transfers (for EU residents), MasterCard, and PayPal. The app uses Exscudo’s proprietary EON blockchain to facilitate internal transfers – and just like in Novi, in-app transactions are free, including money transfers made through the wallet’s built-in messenger.
Now Exscudo works on to support more cryptocurrencies on 15 different blockchains. The team is also exploring the possibilities of building a new platform based on Substrate, Avalanche, Solana, or a different Layer-1 network, which would connect Exscudo to the wider blockchain ecosystem and allow the company to focus on creating new products.
The downside is that the wallet is currently available only to Android and iOS users, but there are plans to expand to other platforms, as well as to add support for more cryptocurrencies on 15 different blockchains.
Overall, this approach seems more promising than Novi’s: while FinTap doesn’t promise free fiat top-ups (there is a small commission) or crypto-to-cash conversions, it provides multiple ways to switch between crypto and fiat, including for less-used altcoins.
PayPal and Neteller pave the way for combined cryptocurrency/e-money platforms
PayPal already allows users to pay with BTC
When PayPal first announced Bitcoin support in October 2020, few could imagine how fast the payment giant would move. First, it simply allowed users in the US to buy and hold BTC in their PayPal account, though it wasn’t possible to withdraw BTC to an external wallet.
Next, in March 2021, PayPal enabled paying for purchases with BTC, ETH, LTC, and BCH through its ‘Checkout with Crypto’ feature. Merchants can now accept crypto payments; and for those that don’t, the app instantly converts the crypto in the user’s account into fiat without charging extra fees, and then completes the purchase.
While the Facebook-supported Novi and Diem are still far from a full launch, PayPal is already introducing thousands of new users to crypto. In fact, as Bitcoin reached a new all-time high on October 20, PayPal recorded its high-ever volume of BTC trades: over $145 million.
Neteller’s new crypto wallet supports 38 crypto & 40 fiat currencies
Meanwhile, another popular e-wallet, Neteller, has launched a crypto wallet as part of its larger digital payment platform. Users in 10 countries can now convert fiat into crypto and back, and even send funds directly from their fiat balance to external crypto wallet addresses – something you can’t do on PayPal yet.
So far Neteller supports 38 cryptocurrencies – fewer than FinTap but still impressive, considering that PayPal supports only four. Even more impressively, 40 fiat currencies are supported.
In conclusion: what’s the best road towards mass adoption?
Mass crypto adoption isn’t here yet, but we are inching closer. The most promising way forward seems to be two-pronged: on the one hand adding crypto support to popular fiat-based payment apps (like PayPal, Revolut, Neteller, etc.); and on the other hand, making it easy to convert between crypto and fiat in blockchain wallets, with multiple payment options for fiat users (such as SEPA and PayPal in FinTap).
This way one can encourage more users to try crypto for the first time, but also incentivize existing crypto holders to use their coins, because buying more with fiat is so easy. As for Novi and Diem, creating a crypto-based economy within Facebook, Messenger, and Instagram is a lofty goal; but before Facebook gets there, others may be already far ahead.