How do I Engage Safely with Stablecoins?

How do I Engage Safely with Stablecoins?

In a previous article, I discussed what stablecoins are and how they are revolutionising many aspects of money movement. If it left you wondering how your business can capitalise on this opportunity but also concerned about where the potential bear traps are, you are not alone. In this article I will focus on a few of the concerns one should have when planning to integrate stablecoins payments into their business platform.

Operational considerations

The most obvious question is what needs to be done for your business to accept cryptocurrency payments. The good news is that there are plenty of online payment processors and gateways that will accept stablecoin payments on your behalf. Subject to some restrictions, gateways such as Stripe and Worldpay both offer it as a plug-and-play option, in which stablecoin payments are treated as just another payment method at checkout.

Fees

Handing the implementation complexity off to your payment gateway doesn't totally absolve you of any operational overhead. Crypto payments differ from fiat where the cost of payment is normally hidden from the consumer, in crypto that cost is exposed to the user. In addition, that cost can and does vary depending on the blockchain network your customer chooses and how busy it is. As it is not a fixed cost, consumers may be shocked at how much it can fluctuate from one transaction to the next. Stripe, for example, provides four different options of blockchain networks for the user to select from. So ultimately, the amount the customer pays is a result of their choice of blockchain network. As the business owner you stand to benefit from just how much cheaper the costs to receive payments via stablecoins are in comparison to credit cards.

Independence 

If you do choose the independent route without the use of an online payment gateway then the choice of blockchain network is yours. In which case you will have to research which network(s) are the most reliable and cost the least. This route also introduces the need for you to create your own digital wallet and use that to collect the payment. For the sake of brevity we shall not dwell on how they work, for now just know they are pieces of software that can best be described as a hybrid between an email client and an authenticator application. 

The upshot is that if you choose to use a public blockchain network to receive payments then the contents of your digital wallet are public. To be clear, no one else has access to the stablecoins in your wallet, they can just see what is in your wallet. Only you can access the contents of the wallet. This publicity extends to the transactions that your business’s wallets are engaged in, receiving payments from customers, paying suppliers and moving money around is accessible on the public blockchain for anyone to look up. For those that are privacy conscious there are some solutions and processes that can be implemented in order to shield this which are beyond the scope of this article but I will happily talk you through them.

Customer Privacy 

If your business is one that consumes and stores data about your customers then data privacy is an ongoing concern. For example, if you are taking shipping details in order to send products, then you’re consuming and storing Personal Data and Personal Identifiable Data (PII). You will undoubtedly have processes and solutions to ensure you are compliant with privacy legislation for the jurisdiction in which you conduct business in. Expanding your data inventory to support stablecoins payments means storing wallet IDs. These ID’s need to be considered another data point that you must protect as being a centralised entity it is theoretically possible for you to associate a wallet address to a real person. Which brings me to another class of concerns that you should be aware of.

Regulatory Considerations

To be clear, I am a technologist, not a lawyer. For legal opinions please seek out a lawyer. Nonetheless, governments around the world have spotted the opportunity that stablecoins bring thanks in no small part to the large institutions bringing them to their attention. As such they have and are currently fast tracking regulatory frameworks of varying flavours and impact levels in order to govern the fast-moving space. As with any part of your business you should make sure you are familiar with the rules. Take the time to identify if any of them affect your ability to transact in stablecoins and what responsibilities they impart on your business if you do.

Jurisdictional variation 

In most instances, regulation targets the stablecoin issuers themselves as opposed to the end user. However there are some edge cases. For example, in the UAE, legislation states that if buying or selling goods and services the stablecoin used to pay must be dirham-backed only. The consequence of such a requirement is that it will limit the blockchain networks you can choose as they will have to support that particular stablecoin currency.

It should be noted that there are different flavours of stablecoins which are differentiated by issuer. For example there is USDT, USDC, PYUSD etc, they all do the same thing just issued by different companies and their availability on different networks will vary. However, where the issuing company is based will determine which regulatory framework they fall under and subsequently the compliance requirements they are subject to. Some of the requirements are technical in nature. For example in US based legislation it is required that issuers have the ability to seize stablecoin tokens if ordered to do so by a US authority.

Conclusion

None of these considerations are show stoppers. A fact that is demonstrated clearly by the rapid adoption of stablecoins behind the scenes by businesses large and small. As with anything in life the best way to learn is to do. If you are interested, I would strongly recommend you set up a personal digital wallet, buy some stablecoin and start transacting. They say experience is the best teacher and this case is no different.