“Okay, but where can you spend bitcoin?”
It’s a question I face as a crypto journalist from skeptics on an almost daily basis. And while it is annoying at this point, it does speak to a reasonable criticism of cryptocurrencies: if digital assets are so great, then why can’t people spend them at their favorite deli or coffee shop?
It’s a problem that New York-based Flexa is trying to solve. The firm, which announced a $14.1 million fundraise on Thursday, offers a platform that aims to bridge the gap between crypto holders and merchants, which are known to be wary of interacting with the volatile market.
Flexa functions similar to Apple Pay inasmuch as users can have their QR code scanned at merchants to buy goods. “[The merchants] don’t need any hardware or software upgrade to their existing systems,” CEO Tyler Spalding, a serial entrepreneur, explained to The Block. “Let’s say it is a $100 transaction — we create a backwards compatibility code they can scan into their system and then we tell the [Point-of-sale] this is good and then reconcile via an ACH payment after the fact,” Spalding added.
Even as Wall Street giants such as Goldman Sachs and Intercontinental Exchange wade into the market for digital currencies, merchants have mostly stayed away. “Since early 2018, there appears to have been little change in mainstream acceptance of cryptocurrencies,” investment banking giant JPMorgan noted in recent research. “Many of the major merchants that accepted cryptocurrency payments a year ago continue to do so (Microsoft, Newegg, Overstock, etc), while a handful (Expedia, OKCupid) have discontinued acceptance due to challenges … namely transaction complexity and currency volatility.” Indeed, a company that accepts a bitcoin payment from a customer has no idea if they will be able to convert it into fiat at the same price of the good they are selling.
“We liquidate the crypto in real-time with our exchange partners — there are no FX charges for customers,” Spalding noted. The crypto is also debited from their account in real-time.
As for the funding round, its backers include Pantera Capital, 1Kx, Nima Capital, and Access Ventures. The funding will go towards the firm’s public launch in May. The firm declined to comment on its specific merchant partnerships.
As for the future of what Spalding hopes to accomplish, he said the firm’s ambitions are to serve as a hub between cryptocurrency projects, merchants, and customers.
“A project will be able to come to us and say I want to be able to use your services, like Stripe, they can download the SDK, and spend their tokens through our system.”
This post has been updated to clarify a quote in the final sentence.