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Bitcoin Payments: As Coinbase Commerce Drops Native Support for Coin, How Will It Affect BTC Price?

Last Updated February 19, 2024 9:54 AM
James Morales
Last Updated February 19, 2024 9:54 AM
By James Morales
Verified by Peter Henn

Key Takeaways

  • Coinbase Commerce has dropped support for on-chain Bitcoin payments.
  • The crypto payment gateway will focus on ERC-20 tokens instead, Coinbase said.
  • Bitcoin’s price was unaffected by the news, but the evolution of Bitcoin payments could affect cryptocurrency markets more generally.

Coinbase has announced that its crypto-based retail payments platform, Coinbase Commerce, will drop support for native Bitcoin payments. The move is yet another blow to the cryptocurrency’s function as a peer-to-peer payment platform, which is increasingly eclipsed by another narrative for the technology – Bitcoin as digital gold

But do BTC payments still have a future? And what does it mean for the market if they don’t?

Coinbase (Kind of) Ditches Bitcoin Payments 

Coinbase Commerce quietly removed support for on-chain Bitcoin payments last week. Bitcoin forks that had previously been integrated on the platform were also affected.

The platform said : “You can still accept Bitcoin, Bitcoin Cash, Dogecoin and Litecoin as long as your customer has a Coinbase account.” 

But that did little to appease Bitcoiners. After all, enabling BTC payments only for people with a Coinbase account contradicts Satoshi Nakamoto’s vision of “allowing any two willing parties to transact directly with each other without the need for a trusted third party”.

On February 18, the product lead for Coinbase Commerce, Lauren Dowling, turned to Twitter to explain the decision. While she said the firm was committed to on-chain commerce, she acknowledged it was turning away from what are known as UTXO chains  to focus on Ethereum-compatible cryptos.

In place of native UTXO tokens, Dowling suggested using wrapped ERC-20 versions instead.

She said: “Customers can use any self-custody EVM wallet to pay. The fastest checkout is with any native asset or ERC-20 (including Wrapped Bitcoin) on L2s.”

“Crypto Will Happen on Layer 2,” Says Brian Armstrong

In line with Dowling’s comments, Coinbase CEO Brian Armstrong said  he believes “paying with crypto is going to primarily happen on Layer 2 in the future.”

He added: “Paying for stuff online with crypto won’t really go mainstream until we get off layer 1, and reduce transaction fees and confirmation times, so we’re trying to accelerate the move toward that world. I think the market for people paying for everyday items on layer 1 will be pretty small, regardless of what chain (maybe other than Solana).”

For now, that means merchants using Coinbase Commerce won’t be able to accept non-EVM payments. 

However, Armstrong said the company is working on integrating Bitcoin Lighting into Coinbase and that “hopefully” there would be opportunities to make Commerce payments with Lightning in the future.

Markets Unfazed by Coinbase News

While Coinbase Commerce is a popular crypto payment gateway, any impact on transaction volumes is likely to be negligible.

As such, news that the platform had ceased supporting on-chain BTC transactions didn’t dampen what was ultimately a bullish week for crypto markets, which saw Bitcoin’s market cap climb above $1 trillion for the first time since 2021.

In the end, Armstrong hit the nail on the head with his observation about transaction fees and confirmation times.

Sure, there will always be a handful of die-hard Bitcoiners who insist on doing everything on-chain. But for most people, Layer 1 BTC payments are unnecessarily cumbersome when there are so many cheaper, faster alternatives.

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