Cryptocurrency payment tools, the most promising niche track in 2024?

Cryptocurrency payment applications have become a hot track in the world of crypto assets. Since 2023, there have been continuous reports of substantial financing in this sector, with impressive backgrounds of the investors involved.

Around February 5, the cryptocurrency payment application Oobit announced the completion of a $25 million Series A financing round, marking one of the highest publicly disclosed financings in the Web3 industry since the beginning of 2024. The investment institutions include Tether's investment arm, Titan Fund under CMCC Global, 468 Capital, and Solana co-founder Anatoly Yakovenko leading the round.

Oobit offline payment scenario

Interestingly, according to publicly available information, Oobit's previous main business was not a cryptocurrency payment application, but rather a series of technical and operational services centered around cryptocurrency exchanges. It remains to be seen whether the project will retain only payment services and abandon its previous business entirely. However, from the perspective of the financing amount and the backing investors, it is clear that cryptocurrency payment applications are gradually becoming darlings of capital.

What are cryptocurrency payment applications? What are the representative projects? What is the future outlook?

Users familiar with cryptocurrency trading often face a series of questions about how to directly use their digital assets for real-world consumption; or how to bypass the cumbersome steps of downloading exchanges and registering digital wallets to quickly and directly purchase digital assets. These pain points have become increasingly apparent with the surge in the number of cryptocurrency holders, and cryptocurrency payment applications have emerged as a solution in the eyes of trading users.

In simple terms, cryptocurrency payment applications are tools that allow users to make online payments using digital assets like Bitcoin, Ethereum, and USDT. Since the transaction process is entirely on-chain, they also have unique advantages in cross-border transaction settlements. For instance, users can directly pay with equivalent USDT at offline stores using Oobit, and even place orders on cross-border e-commerce websites without the need for currency exchange, making it convenient and hassle-free.

Currently, the most well-known application in this sector is Moopay, often referred to as the PayPal of the cryptocurrency world. With Moopay, people can purchase virtual currencies using credit cards, mobile wallets, bank transfers, and enjoy better deposit and withdrawal services. The platform's first round of financing amounted to $550 million, and it is actively building compliance in multiple countries around the world.

Moonpay official website page

While Moonpay appears to have a strong first-mover advantage, this sector has inevitably become competitive. The consensus among Web3 entrepreneurs is that as cryptocurrency assets become more widespread, cryptocurrency payments will gradually become one of the ways people live. As stated in Moopay's own vision: to bring 1 billion people into the cryptocurrency asset circle by 2030.

A look at representative financing cases in the cryptocurrency payment sector from 2023 to present

Since 2023, there have been a series of large financing cases in the cryptocurrency payment sector, with its popularity rivaling that of wallets, exchanges, and public chains to some extent. Of course, end users may perceive this less strongly, as the use cases for cryptocurrency payment applications are directly related to offline consumption and traditional financial services, which are subject to regulatory scrutiny. Therefore, the pace of advancement is noticeably slower than that of exchanges and public chains, which fully embody Web3 attributes. In other words, as a bridge between Web2 and Web3, cryptocurrency payments have not yet reached the same level of popularity among user groups as exchanges.

From another perspective, cryptocurrency payments may be a pseudo-demand for new Web3 users, as this group may still have a vague understanding of cryptocurrency assets. In contrast, exchanges and wallets are often the first stop for new Web3 users entering the industry, especially since the deposit and withdrawal services in cryptocurrency payments can also be replaced by the former. Objectively speaking, the target audience for cryptocurrency payment applications is mature Web3 traders. However, as the industry develops, the imagination brought by this group of users is sufficient to support the financing amounts of numerous projects.

Foreign media report: The Russian Ministry of Trade develops tools to help businesses conduct cross-border payments in cryptocurrency to evade sanctions.

In 2023, typical financing cases in the cryptocurrency payment application sector include:

1. Around February 6, the cryptocurrency payment solution Code completed a $6.5 million seed round financing, co-led by M13 and Union Square Ventures (USV);
2. Around February 20, TipLink announced the completion of a $6 million seed round financing, led by Sequoia Capital and Multicoin Capital, with participation from Solana Ventures, Circle Ventures, Paxos, and angel investors Vinny Lingham and Sarah Guo;
3. Around June 20, Singapore-based cryptocurrency payment provider dtcpay (formerly Digital Treasures Center) completed a $16.5 million Pre-A round financing, led by Pontiac Land Chairman Guo Liangde, with participation from former Carlyle Group Managing Director and Partner David Tung, Burgess Asia Chairman Jean-Marc Poullet, and former KPMG Singapore and Asia-Pacific Chairman Tham Sai Choy;
4. Around August 18, cryptocurrency payment company CityPay completed over €2 million in seed round financing, including $500,000 in cryptocurrency investment, with participation from Tether, Presto Ventures, and other angel investors;
5. Around September 22, cryptocurrency transfer and payment service startup Mesh (formerly Front Finance) completed a $22 million Series A financing, led by Money Forward, with participation from Galaxy, Samsung Next, Streamlined Ventures, SNR.VC, Hike VC, Heitner Group, Valon Capital, Florida Funders, Altair Capital, Network VC, and several angel investors. On January 29 of this year, PayPal's venture capital arm, PayPal Ventures, invested $5 million in Mesh through its stablecoin PYUSD and an additional $1.5 million in cash;
6. Around October 25, cryptocurrency payment gateway Triple-A completed a $10 million Series A financing, led by Peak XV Partners and Shorooq Partners.

Risks and opportunities coexist; the cryptocurrency payment sector faces multiple challenges to break through globally

Regarding the future market prospects of the cryptocurrency payment industry, professional institutions generally express a consistent affirmation. A white paper released by Ripple and the U.S. Faster Payments Council in March last year indicated that nearly 300 surveyed payment leaders from 45 countries reached a consensus that implementing blockchain and cryptocurrencies in payment solutions would lead to payment infrastructures that are faster, more economical, and more transparent than current capital transfer systems. They also believe that cryptocurrency payments are particularly beneficial for cross-border settlements.

Report released by Ripple and the U.S. Faster Payments Council

However, there are corresponding financial risks associated with the cross-border flow of assets and the gray area between Web2 and Web3. A survey released by the Bank for International Settlements (BIS) in July last year pointed out that if widely used for payments, cryptocurrencies, including stablecoins, could pose a threat to financial stability. Therefore, regulatory challenges are a key reason why the cryptocurrency payment sector has yet to fully flourish. For example, in June last year, U.S. Senator Elizabeth Warren stated at a Senate hearing that the use of cryptocurrencies in fentanyl trafficking was becoming increasingly rampant, and she advocated for legislation to cut off this channel; in July last year, cryptocurrency payroll service provider Bitwage was prohibited from paying US residents in USDC due to regulatory concerns; since June last year, Bali, Indonesia has cracked down on the use of cryptocurrencies as a payment method by foreign tourists in hotels, restaurants, tourist destinations, shopping malls, and other places.

In summary, although the prospects for the cryptocurrency payment sector are quite broad, the risks and challenges inherent in it still require attention.