The coming of Bitcoin (BTC) and other cryptocurrencies has totally changed the game of payments. More governments and payment service providers have now appreciated the need for digital currencies in the payment sector. Benefits of cryptocurrencies include cheap transaction fees, privacy, fast, transparent and secure money transfers.
Banks such as Reserve Bank of India (RBI) have invested heavily in the exploration of payment alternatives including cryptocurrencies (CCs), according to the Economic Times. The RBI is delving into the need for cryptocurrency and their use cases in this developing digital payment field. The bank also plans to issue a Digital Payment Index (DPI) to capture the scope of digitization of electronic transactions and payments in India.
The RBI has published a booklet showing the track of digital payment and settlement in the country and indicated that many factors including the effectiveness of blockchain technology, increased innovations, Covid-19 pandemic, etc., has taught them a lesson to embrace virtual currencies (VCs) or a digital version of Indian rupee (e-INR) in the current banking and financial structure – but a clear regulatory framework has also to be drafted.
As CoinIdol, a world blockchain news outlet, reported, the RBI was trying to ban virtual currency. The country’s crypto entrepreneurs and enthusiasts had to turn to the Supreme Court which cancelled the ban, thus relieving things for business in India. The fact that the bank has changed its stance on cryptocurrency proves that the entire payment industry is shifting to the digital realm.
Cryptocurrency to revolutionize payments
Also, some US banks are issuing their own distributed ledger technology (DLT)-based systems, including stablecoins, private digital currencies and cryptocurrencies to enable Business-to-Business (B2B) payments between their clients.
For instance, JPMorgan successfully tried its own coin called JPM Coin, for transacting cross-border payments as a cryptocurrency between its clients. After getting a green light from New York State watchdogs, Signature Bank also rolled out a DLT-based payment system for its clients. Blockchain is the basal technology behind cryptocurrencies. Banks from Japan, China, France, etc. are also developing blockchain-powered payment systems based on VCs.
If countries manage to integrate digital currencies into their payment systems, the coins, such as central bank digital currency (CBDC), that will be used in these bank-managed crypto payment systems will be different in many ways from BTC and other VCS. Unlike Bitcoin and other PDCs, the banks will be offering digital currency services to only their clients.
Other payment giants such as PayPal, MasterCard and Visa are also trying to develop effective mechanisms that can incorporate crypto payments.
Binance users are now using crypto-backed Visa payment cards to make transactions. PayPal also rolled out a buy and sell service in November last year and this event led to a drastic bull run of most coins. Users of PayPal’s services can now buy, sell and hold accepted CCs.
MasterCard is also expanding its digital currency project to support widespread adoption and innovations in the DLT cryptocurrency sector. Thanks to blockchain technology for making banks and other payment services providers appreciate the benefits of cryptocurrency.