Bank’s stablecoin used for eCommerce
Alt coins,  Cryptocurrencies

In world first, bank-issued stablecoin used at online retailer

Sygnum’s digital Swiss franc was used to buy an iPad from Digital Galaxus, Switzerland’s largest online retailer

A financial institution focused on digital assets says it has successfully completed the world’s first eCommerce transaction using a bank-issued stablecoin.

The Sygnum Digital Swiss Franc (DCHF), which is pegged on a 1:1 basis with the fiat currency, was used to complete a payment for an Apple iPad at Digitec Galaxus, Switzerland’s largest online retailer. Coinify, a digital currency platform provider, enabled the sale to take place. 

According to Sygnum, which was granted a Swiss banking license one year ago, DCHF eliminates the need for credit and debit card systems, will reduce costs and fraud that hurt the profitability of merchants, and enables transactions to be processed in real time. 

The bank believes this new digital asset could even revolutionize the $3.5 trillion eCommerce industry—establishing direct connections between consumers and online retailers.

Currently, the DCHF payment option is only available to a “select group of Sygnum clients,” a representative of the bank told Modern Consensus in an email. 

Forward towards the past

Mark Højgaard, Coinify’s CEO, said in an Aug. 27 blog post: “With the DCHF and other digital currencies, the future of money is going back to its roots; exchanged between two parties, instantly and simply. This speaks volumes about the potential of trusted, price-stable digital currencies in the e-commerce space.”

Sygnum said its offering stands out against other stablecoin issuers such as Tether because it is a regulated bank—meaning one Swiss franc is verifiably held as collateral for every DCHF that is in circulation. The bank said:

“We believe a stablecoin issued from a regulated, audited bank that holds the equivalent amount of fiat in a Central Bank provides the highest level of transparency and the trust, which is one essential factor for broader adoption.” 

Providing this complete transparency is likely to be a bigger obstacle to widespread adoption of stablecoins than technical challenges, it added.

The company’s approach to tokenization also means digitized versions of assets such as company shares and real estate can be securely traded, paid for, and delivered instantly.

Checking out with crypto

This isn’t the first time that Digitec Galaxus has dabbled in digital assets—far from it, in fact. The retailer actually started accepting cryptocurrencies as a payment method all the way back in March 2019, supporting the likes of bitcoin, ether, XRP, litecoin and a host of other altcoins. At first, crypto could only be used for purchases that were over 200 CHF ($220 in value), but this minimum spend limit was removed in August of last year.

Given that Digitec Galaxus offered an estimated 2.7 million products at the time—shoehorns, wheat beer, and gaming PCs among them—this was a significant milestone for crypto adoption in Switzerland, a country with a population of about 8.6 million.

The online retailer will add DCHF to the list of cryptocurrencies it accepts when Sygnum and Coinify release it publicly.

Alex Hämmerli, a spokesperson for the retailer, told Modern Consensus via email that enabling customers to use stablecoins such as DCHF “further enhances their choice and convenience.” Although the experiment went without a hitch, it may be some time before this asset is available to the public at large.

When asked whether there was much appetite to use stablecoins among its consumer base, he explained there is a lot of potential—especially as many of its customers already use crypto to some extent, Hämmerli said. 

The equivalent of 1 million CHF ($1.1 million) in digital assets had been spent across its two online stores since support for crypto was added last year—with Bitcoin and Ether the most popular choices.

But of course, there are downsides. Hämmerli said cryptocurrencies are not the cheapest payment option that consumers can choose from. The exchange rate that consumers are offered is only valid for 15 minutes, meaning shoppers need to pay the highest transaction fee possible so the crypto payment is confirmed in time. Coinify, the platform that facilitates payments, also charges a conversion rate of 1.5%.

Lots in store

Cryptocurrencies are set to play a much bigger role in eCommerce in the months to come. 

Shopify, which has seen its market share explode during the coronavirus pandemic, is one platform that allows smaller merchants to accept digital assets. Rumors that PayPal will start directly selling Bitcoin to its 325 million users also add weight to the theory that crypto is on the verge of bursting into the public’s consciousness like never before.

Another big milestone that could bring millions of consumers to crypto will be the long-awaited arrival of Facebook’s Libra stablecoin… that is, if it ever launches.

With cryptocurrencies, private stablecoins such as DCHF and Libra, and central bank digital currencies all set to be jostling for market share within a few years, the public is set to be spoiled for choice. As reported by Modern Consensus last week, ex-Reserve Bank of India governor Raghuram Rajan believes there’s room for all of these digital assets to co-exist. He warned it would be “problematic” if any single virtual currency gains a monopoly, adding: “Some competition is useful.”

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Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.