21 April 2022 |

Is the Stripe For Crypto Just Stripe? Maybe…But Probably Not 

By Ian Kar

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Stripe dropped a doozy announcement recently: a brand new suite of products dedicated to crypto. 

Product-wise, it’s an elegant refactoring of a lot of their existing capabilities: leveraging Connect to power fiat payouts, Treasury to power Wallet management, and creating a simpler onboarding for NFT marketplaces with Stripe Identity. (Something that went a bit underrated, as Charley Ma pointed out: stablecoin integrations and payouts. The website copy’s changed since Charley’s tweet…hmm…anyway…).

As lot of my friends know, I’ve been pretty obsessed with crypto infrastructure, specifically on and off ramps, since summer 2021. I’ve had a lot of conversations with folks building in and around crypto infrastructure over the past few months, and have helped diligence some deals for VC’s too (what can I say I like to help.) And many founders and operators have been eagerly awaiting Stripe’s launch, so I don’t have any doubts that this will be successful (they’ve already signed up companies like FTX and Blockchain.com).

Something a lot of investors have wondered is if there’s a Stripe for Crypto to be built here. And while Stripe hasn’t been particularly quiet about building crypto infrastructure products, now that they’re out, I think an interesting question is whether the future of crypto infrastructure going to be one major player dominating the field or a massive market with many players? My guess is the latter—here’s why. 

A lot of crypto problems in general remind me of the fintech ecosystem from years ago, and on and off ramps in particular remind me a lot of the early days of digital payment processing. 

Take yourself back to 2009. I was a senior in high school, and Patrick and John Collison were starting Stripe. Back then, the hottest thing in fintech weren’t neobanks (in fact, Chime wouldn’t start until 5 years later); digital payment processing was all the rage. The direct to consumer e-commerce industry was blowing up and there was a massive gap to be filled around digital payments. Back then, these transactions were riddled with fraud and chargebacks, and companies like Braintree and Stripe were aiming to help new and existing merchants sell stuff online. 

Over time, Stripe developed into the behemoth it is today: not only did competitors get acquired (PayPal bought Braintree in 2013), but the e-commerce industry grew multiples over the next decade plus too. For Stripe, it turns out that helping companies process digital payments was simply a wedge: the startup’s expanded into a plethora of financial products that a business and their customers may need: business financing through Stripe Capital, card issuing through Stripe Issuing, fraud detection through Stripe Radar, and more. 

But despite what you see on Twitter, Stripe isn’t the only payment processing firm in the world. In fact, there are a few multi-billion dollar digital payment processing companies: PayPal (and Braintree), CurrencyCloud, Adyen, Checkout.com, Melio Payments, Bolt, and not to mention the amount of financial institutions that now have digital payment processors in-house (JPMorgan and AmEx to start.) Even newer startups like Coda Payments have been growing at tremendous rates by focusing on newer types of commerce around gaming.

I suspect crypto infrastructure, especially around on and off ramps, will play out really similarly to Web2 digital payments—at first, the market seemed dominated by first market movers Stripe and other players like Paypal/Braintree. But companies like Coda Payments, Adyen, Bolt have shown that there are still massive payments businesses to be built by differentiating your product: geographically (Adyen, Checkout.com), focusing on other adjacent problems (Bolt), or fast growing new subsectors (Coda Payments). 

But besides historical business precedent, there are other reasons to believe why, while Stripe will be really successful, it won’t eat the entire market. Web3 infrastructure is already pretty crowded, and will get more competitive over time. Companies like MoonPay, Wyre, and Sardine are all raising tremendous amounts of capital to tackle the crypto infrastructure space and are all differentiating in their own way. (Author’s note: this article was written before the Bolt-Wyre acquisition…which we’ll be writing more about next week).

I’ve gotten to know the Sardine team really well and have learned a ton around crypto infrastructure, risk, and fraud from cofounders Soups Ranjan, Aditya Goel, and the Sardine team. Their experience spans from building crypto at Revolut and then risk at Coinbase, and they’re domain experts who think creatively about solving fraud for fintech and crypto companies. They recently raised a $19.5 million Series A from Andresseen Horowitz, Nyca, and Experian. 

Moonpay started out as mainly focusing on converting fiat into crypto through an on and off ramp API product, which has coverage across 160+ countries and one simple integration, which is attractive for developers. That proves to be the case with customers like OpenSea, Abra, Bitcoin.com, and Binance. 

Stripe isn’t the only fintech infrastructure company eagerly looking at crypto companies as potential customers: banking-as-a-service, compliance firms, global payment processors, and others have not only been hiring and building crypto related products but, from what I hear, are getting big crypto customers too.

  • Hummingbird: Full disclosure that I’m an investor in Hummingbird’s Series A round and that I’m super hyped for what they’re building in general around AML. The AML company is courting crypto firms too, touting crypto compliance as one of their use cases. Hummingbird provides native support for blockchains and wallet addresses, data visualization for transactions, and integrations with blockchain investigation providers. Not only that, but the team is deeply rooted in crypto—CEO Joe Robinson previously worked at Circle as the VP of Risk and Fraud, and then VP of Product too. 
  • Checkout.com: The payments company has an entire page dedicated to crypto, and touts customers like MoonPay, Circle, Blockchain.com, Crypto.com, and Binance. Given their expertise, Checkout.com helps companies scale pay in and pay outs globally. 
  • Alloy: The KYC company been interested in crypto for some time—I hung out with Alloy CEO Tommy Nicholas in July 2021 and we talked a ton about crypto on and off ramps, and the unique problems that are there. So can confirm Tommy’s an OG crypto guy. Alloy’s been relatively public about their interest in crypto: hiring for a crypto growth strategy role in NYC and last April announcing a partnership with Gemini to power identity decisioning and verification for the Gemini Credit Card. 
  • Nium: An international banking-as-a-service company backed by Visa, Nium is expanding its platform into crypto too, run by Joaquin Ayuso de Paul. Nium is looking to help companies do everything from investing in crypto to API’s for fiat to USDC payments. 

Lastly, as corny as this sounds, I think the real “Stripe for Crypto” is one that focuses on innovating and solving for new business and consumer use cases in crypto. The more I look, the clearer it is that there are a ton of quirky problems that software can solve. 

Back to our Web2 analogy—payment processing was a great example of a subsector of fintech to focus on. There was a ton of market demand with existing merchants looking to expand into online sales, and even more demand around new businesses and types of companies that were forming around e-commerce (marketplace businesses like Uber and Lyft, for instance.) 

The same will happen in crypto too. For instance: when we launched Crypto Tonight at Fintech Today, we also explored if it were possible to do subscription payments for a paid community through crypto. And while there were some hacks that we thought of, there wasn’t actually a “Recurly for Crypto” that facilitates seamless recurring payments. 

We might have been a weird use case but I’m willing to bet a lot of money that I won’t be the only digital creator that is eager to accept recurring payments from subscribers in crypto. And these aren’t the only problems out there—there are a ton of widespread problems that businesses and consumers will face over the next few years that can definitely be solved at an infrastructure level. 

So while Stripe’s crypto product is a massive development for the crypto infrastructure market, I think there’s a ton more to build too. If you’re looking to jam, hit me up at [email protected].