Token On-Ramps: It's Not All About the Benjamins

21 Aug 2023

21 Aug 2023 by Luke Puplett - Founder

Luke Puplett Founder

Cryptocurrency exchange Binance recently lost payment services from Checkout.com, a key fiat on-ramp provider that enabled users to convert between fiat currencies and crypto. This has sparked renewed concerns around crypto's reliance on centralized on-ramps to bridge the gap with the traditional finance world.

However, while these fiat gateways provide a useful service today, they contradict the ethos of decentralized digital assets. As crypto matures, the need for fiat conversion itself may diminish if circular economies develop where digital assets can be earned and utilized directly for goods and services.

"Money is only worth what other people will give in exchange for it."

Niall Ferguson

Economist Niall Ferguson astutely noted that "Money is only worth what other people will give in exchange for it." For digital assets, this means value could emerge from direct exchangeability for goods, services, and opportunities, without the need for fiat conversion through centralized third parties.

This article will explore how the concerns over lost fiat on-ramps may be short-sighted. We'll examine how alternative on-ramps are emerging for acquiring crypto without fiat, and how crypto's utility and value may ultimately stem from real economic activity, not interfaces with national currencies. The end goal is an open system where centralized bridges become less crucial.

On-Ramps Today - The Current Landscape

For most people, the easiest way to acquire digital assets is to purchase them with fiat currency through centralized exchanges like Binance and Coinbase.

These fiat on-ramps provide a straightforward entry point for new users to exchange their national currencies for digital assets. However, handing over control of these on and off ramps to regulated intermediaries has trade-offs. It introduces counterparty risk, and means crypto adoption still depends on the legacy financial system it hopes to reform.

The recent Checkout.com decision highlights the precariousness of this reliance on centralized providers. If they deny service, user access is blocked. This is spurring increased debate on whether alternatives may be needed for more open and decentralized access.

Earning Digital Assets - An Alternative On-Ramp

Rather than buying digital assets with fiat, people could start earning them as direct compensation for regular work and services. Just as many are paid in fiat currencies today, blockchain-based assets could be provided as remuneration for mainstream jobs and roles.

However, people will only accept digital assets as payment if they are confident those assets can later be exchanged for the goods, services, and opportunities they need in life. The usability of the assets matters just as much as initially earning them.

If digital asset economies mature where people can seamlessly utilize earned assets for daily transactions and necessities, it creates an alternative on-ramp. rather than needing to buy crypto with fiat, employment itself becomes the gateway to asset ownership.

This brings asset ownership mainstream without centralized intermediaries, aligning with the ethos of decentralization. But it requires the tangible exchangeability of those assets for goods and services people value. Usability unlocks the viability of earning digital assets as an on-ramp.

Taxes - The Ultimate Off-Ramp?

Tax obligations create a consistent downstream demand for off-ramping digital assets into fiat currencies. This makes taxation the ultimate systemic off-ramp - a force that brings assets back into national currency ecosystems. However, as adoption advances, governments may eventually need to accept tax payments directly in digital assets, or establish compliant stablecoins as an official off-ramp option.

If citizens hold most of their wealth in digital assets, forcing conversion to pay taxes in fiat no longer makes sense. Directly accepting assets, or intermediary conversion via stablecoins, may become a necessity.

This would turn tax from the ultimate off-ramp into a destination - governments embracing digital assets as legitimate fiscal payment rails. Just as currencies evolved from physical commodities to fiat over time, tax policies will also eventually transition towards natively accepting digital value exchange.

Conclusion

While the loss of Checkout.com's services has highlighted reliance on fiat on-ramps, the value of digital assets stems from exchangeability for goods, services, and opportunities - not fiat gateways. As the saying goes, "It's not about the money. It's about all the stuff."

If people can earn and utilize digital assets directly for necessities, the assets take on inherent utility as conduits to real wealth.

The long-term vision is a tokenized economy fueled by peer-to-peer exchange of value. The true value of digital assets depends on utility - what they can acquire in the real world.


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