Today, BitPay introduced a new stable coin settlement option: Paxos Standard (PAX). Paxos Standards joins Gemini Dollars (GUSD) or Circle’s Dollar Coin (USDC) as settlement options for BitPay merchants.
Since we are now settling with three stablecoins, we wanted to take more time to explain why we are using these stablecoins. In short, technology like this is why BitPay exists. As our CEO, Stephen Pair, said in a recent press release a few weeks ago,
The introduction of the USDC and GUSD stablecoin offers BitPay customers a new alternative to holding Bitcoin and Bitcoin Cash by offering a stablecoin option.
The long answer needs more explanation. What are stablecoins? How do they benefit businesses? Does it matter to anyone else?
What are Stablecoins?
The three stablecoins BitPay supports are ERC-20 tokens that are pegged to a more stable asset, namely the US Dollar. An ERC-20 token is a smart contract following the ERC-20 standard. A feature of the ERC-20 standard is the ability to launch unique tokens on the Ethereum network.
One PAX, GUSD, or USDC are each worth $1.00 USD, and are fully redeemable for $1.00 USD through the Paxos, Gemini, and Circle platforms, respectively. Paxos Standard is issued by the financial firm Paxos which operates under the direct supervision and regulatory authority of the NYDFS and is subject to the New York Banking Law and other applicable U.S. laws and regulations. Gemini, the issuer of the Gemini Dollar, “operates under the direct supervision and regulatory authority of the New York State Department of Financial Services and is subject to the New York Banking Law and other applicable U.S. laws and regulations.” 1 Circle, the issuer of the Dollar Coin, is “registered with FINCEN as a Money Services Business in the United States”2 and was the first company to be awarded New York’s Bitlicense in 2016.
The Benefits of Stablecoins
BitPay settles to merchants in the USA, EU, and a handful of other countries via ACH, SEPA, and bank wires, depending on the location. These methods are stable, but take 1-2 business days. Regardless of how promptly BitPay initiates the settlement, both BitPay and the merchant are at the mercy of weekends and bank holidays and anything else that can slow bank transfers or wires.
For other merchants around the world, we cannot settle to them with a bank wire often because of poor banking structures or the difficulty to create banking relationships in that country or region. In these cases, we need to settle to them with Bitcoin and Bitcoin Cash, which are quick but also subject to price volatility. The price of Bitcoin and Bitcoin Cash is always changing, which adds risks to merchants who receive it as settlement until they can exchange it for fiat currency.
Stablecoins provide the speed of cryptocurrency with the stability of the United States Dollar. This allows our merchants in the US and EU to receive settlement in less than an hour. It also allows merchants around the world to receive settlement that will remain stable and pegged to an internationally accepted currency.
Why Stablecoins Matter
We believe stablecoins could become a large part of the banking system of the future. The Gemini Dollar, Circle’s Dollar Coin, and the Paxos Standard all offer the benefits of blockchain technology through the Ethereum network while providing the stability and trust of the US Dollar. And all three are just beginning to grow and expand. Soon they will empower businesses across the globe to receive payment that is fast and stable.
In 2011, BitPay saw the potential for Bitcoin to revolutionize the financial industry. Seven years later, we still believe in blockchain technology’s ability to change the financial industry, and we still are working to make that future a reality today.
Check out our blog post explaining how BitPay merchants can receive settlement with stablecoins.
Author: Charles Pustejovsky