How crisis and dysfunction fuel token payments

The more turmoil a region's currency or financial networks endure, the more appealing an economy driven by crypto tokens and an ability to convert those to domestic currencies becomes.

Even Western Union, a standard-bearer of money movement, acknowledged how its digital money capabilities have helped it withstand political unrest in some regions and financial shock waves in others, like Argentina.

"We are not seeing as much adoption for crypto as a paying mechanism in the U.S., but we are seeing it grow in markets where money and banks don't function as well for many reasons," said Robin O'Connell, chief revenue officer for Uphold.

Uphold is a currency exchange and cross-border remittance company that specializes in moving any monetary or token value to regions globally. It reports the fastest adoption for crypto in places where money works the worst, according to O'Connell.

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For example, Argentina, where the government has imposed a 30% tariff on any card payments made to merchants outside of the country, is a good market for Uphold.

"As a result, crypto and bitcoin purchases are sky-rocketing there because if you have something that works, but all of the sudden you have to pay a high tariff on it, you are going to see what other options are," O'Connell said.

For several years crypto companies have been working to establish alternative options. In addition to Uphold, other exchanges include Coinbase, Revolut and Robinhood. Uphold tries to differentiate itself by supporting 27 national currencies, 30 digital currencies and four metals while boasting of more than 1,000 trading partners throughout the U.S., Europe, Middle East and Asia.

The San Francisco-based company has access to seven blockchain networks and integrates with seven crypto networks for its more than 1.7 million users. It says this network leads to more than 17 million transactions at a value of more than $6 billion a year.

The seven-year-old Uphold finds demand from companies seeking to move "any form of value" to other countries or for companies making payments to workers.

"It's a little bit like PayPal in that regard," O'Connell said. "But the difference is we have a lot more currencies and cryptocurrencies that people can hold, with the idea being that you can hold any form of value and it can be instantaneously exchanged from one asset to another and then sent to someone else on the network in an instant as well."

It's similar to the FIS Premium Payback Network, which operates to convert loyalty and rewards points into currency at the point of sale — emulating an exchange of different currencies. With that type of service, mobile apps can offer reward redemptions, with the FIS network serving as the engine. It's an exchange of "something of value."

Early in 2018, Square realized the potential of converting cryptocurrency to cash and established a bitcoin trading service for its users of Square cash payments app.

It's not a new concept, but it's gaining attention because the number of retail scenarios in which the token economy becomes a viable payment option continues to grow.O'Connell sees Uphold sitting in a perfect spot as "the payments service for this new token economy."

It's also important for Uphold to have a good relationship with Visa and Mastercard because it needs those card networks' rails to move money after crypto conversions and for users seeking to spend the money or move it to a bank account. Uphold can move tokens to Visa or Mastercard, saying it has credit and debit card funding in more than 100 countries, along with bank connectivity in 35 countries.

"The model makes sense because you have some bitcoin bugs who want to hold onto it or speculate with it, but may also want to spend it," said Eric Grover, payments industry consultant at Minden, Nev.-based Intrepid Ventures. "Real-time conversion of bitcoin into euros or dollars over to the Visa rails solves that."

It is becoming more common to see companies provide that service to those with gold accounts or other valuable commodities as they seek options to convert those assets.

"You're not likely to see a major uptake on something like Uphold because some people say they just don't trust traditional banks," Grover added. "But in places where the financial markets are so bad, or where using other currencies is illegal, the economy would not function if people were not using something else to trade and spend."

It also hasn't hurt bitcoin trading activity in that the current cryptocurrency value has remained steady the past few months in a range of one bitcoin being worth between $9,000 and $10,000. Many investors cited the sharp hit the coronavirus initially caused on traditional markets as a reason for investors turning to cryptocurrency stability.

"Any individual user or business can come to Uphold and create an account to store, send and receive money," Uphold's O'Connell said. "We also have an open API whereby companies can leverage our platform to do a lot of the financial services we offer."

Uphold can operate as the e-wallet for other businesses, handling the KYC and AML security compliance and monitoring transactions for suspicious activity while users convert tokens into dollars or euros and transfer the money to their banks.