Stripe bails on bitcoin as the currency's drawbacks pile up
Bitcoin has lost touch with its original mission of being an alternative decentralized currency, and Stripe has decided that it is no longer worth supporting for payments.
Though the online payment processor may reconsider its decision down the road, its announcement today strikes a major blow to the cryptocurrency's potential for transactions.
"Empirically, there are fewer and fewer use cases for which accepting or paying with Bitcoin makes sense," wrote Tom Karlo, a product manager at Stripe, in a note posted on Stripe's website announcing the company's plan to end support for bitcoin payments on April 23.
Bitcoin is, in some ways, a victim of its own popularity — and the resulting wild, sudden swings in its value, Karlo explains.
"Transaction confirmation times have risen substantially," Karlo said. This, in turn, has led to an increase in the failure rate of transactions denominated in fiat currencies. "By the time the transaction is confirmed, fluctuations in Bitcoin price mean that it’s for the 'wrong' amount."
Bitcoin's fees are high, as much as tens of dollars for a regular transaction, "making Bitcoin transactions about as expensive as bank wires," according to Karlo.
Stripe, which began supporting bitcoin for payments as an early adopter in 2014, is the second major company to say it won't support bitcoin for payments in just the past few days, joining Visa, which said bitcoin and other cryptocurrency's are not "payments players," according to an CNBC interview with Visa CEO Alfred Kelly. Gaming platform Steam also halted bitcoin payments in December, citing costs.
This isn't a death knell for bitcoin, but it is a bad sign for the digital currency's viability in payments.
"Over the past year or two, as block size limits have been reached, Bitcoin has evolved to become better-suited to being an asset than being a means of exchange," Karlo wrote. "Given the overall success that the Bitcoin community has achieved, it’s hard to quibble with the decisions that have been made along the way."
But even this success as a trading asset is less than certain, as as many still see bitcoin as a bubble. Experts are predicting bitcoin does have a future for retail payments, though given the size and influence of Stripe and Visa, it's hard to see that happening in the near term.
In Stripe's case, the rejection is not a Jamie Dimon-style ideological rejection or a national regulatory posture as in China. It's instead a reluctant step back as bitcoin loses its original appeal. Stripe notes that other cryptocurrencies are more viable for payments, noting that it provided seed funding to Stellar.