Accepting Stablecoin and Crypto Payments: What Merchants Must Know About Settlement: By Milko Filipov

Finextra

6 days ago

As stablecoins and cryptocurrencies become increasingly integrated into corporate payment ecosystems, treasurers in large organizations face critical decisions around settlement options. How payments are settled—that is, the currency in which funds are ultimately received—has profound implications for liquidity management, risk exposure, and treasury operations. Far from a mere technical detail, the choice of settlement method is a strategic lever that can influence your organization's financial resilience, capital efficiency, and compliance posture. In this article we will explore the key considerations of settlement models treasury professionals need to understand to make informed decisions.
Offering Multiple Payment Methods to Increase Conversion
Merchants often provide several payment options to meet customers' preferences and boost sales. Imagine you run an online store or a marketplace. At checkout, your customers might want to pay with euros or dollars, and you are probably already using adaptive pricing to sell in local currencies across various markets, making buyers feel more comfortable and increasing your conversion rate. Your organization likely has settlement bank accounts in a few major currencies and automatically converts everything to them.
Alternatively, buyers may prefer cryptocurrencies such as Bitcoin, Ethereum, or stablecoins—digital assets pegged to fiat currencies but operating on blockchain infrastructure. Just like with traditional payments, you want to offer more options to buyers to increase conversions, while also optimizing your treasury processes for settlement. Offering a diverse range of payment methods broadens your customer base and boosts conversion rates, but it also means you must carefully consider how these payments will be settled on your end.
Defining Your Preferred Settlement Currency
As a business owner, you might have a clear preference about the currency you want to receive—perhaps you only want euros or U.S. dollars to simplify accounting and avoid market volatility. In such cases, your crypto payment service provider (PSP) will convert the cryptocurrency payment into your chosen settlement currency before paying out. Understanding what settlement currency you want is foundational because it determines how your funds flow and how you manage currency risks.
Crypto-to-Fiat Settlement: Minimizing Volatility and Complexity
The most common settlement method is crypto-to-fiat. Here, even if customers pay with cryptocurrencies, the PSP converts these payments into fiat currency at current exchange rates and deposits the funds into your bank account. This method is attractive to many merchants because it eliminates the price volatility inherent in cryptocurrencies and simplifies bookkeeping and regulatory compliance. However, convenience comes at a cost—conversion fees are typically higher, so merchants must weigh this expense against the benefit of avoiding crypto volatility.
Crypto-to-Crypto Settlement: Flexibility and Cost Efficiency
Alternatively, merchants can opt for crypto-to-crypto settlement, where payments are settled directly in cryptocurrencies or stablecoins chosen by the merchant. This allows you to accept a wide variety of cryptocurrencies but receive them consolidated into a preferred digital asset—such as Bitcoin or a stablecoin—helping to manage volatility more cost-effectively than converting to fiat. However, accepting numerous cryptocurrencies may increase conversion fees, and settling in stablecoins carries some counterparty risk tied to the issuer's solvency. Still, this approach can be particularly appealing to crypto-native businesses that want to hold digital assets without the immediate need for fiat conversion.
Fiat-to-Crypto Settlement: A Niche but Strategic Option
Less commonly, some merchants may prefer fiat-to-crypto settlement, where payments made in fiat currencies are converted by the PSP into cryptocurrencies before being paid out. This approach may suit businesses seeking to accumulate cryptocurrencies as a hedge against currency devaluation or operating in markets where fiat transactions are complicated or costly. While it adds complexity and cost, for specific sectors and regions, fiat-to-crypto settlement can offer strategic advantages. However, it's generally not widespread due to the additional operational demands it places on merchants.
Settling in Transaction Currency: Avoiding Conversion Fees and Managing Crypto Holdings
Some merchants prefer to settle directly in the transaction currency—the exact currency the customer uses—whether that's a cryptocurrency or stablecoin. By doing so, they avoid currency conversion fees and gain full control over their crypto assets, which can be advantageous if they actively manage cryptocurrency holdings or have suppliers paid in crypto. However, this exposes the business to price volatility and often introduces more complex accounting, legal, and compliance challenges.
Flexible Settlement Models for Complex Business Needs
For larger enterprises with sophisticated treasury operations, a one-size-fits-all settlement approach often isn't enough. These merchants may require the ability to settle some transactions in fiat and others in crypto based on factors like transaction size, buyer location, or exchange rates. Such flexibility helps align crypto exposure with broader financial strategies—optimizing working capital, hedging currency risks, or managing cost of capital. These advanced options typically require more complex PSP features and integration with payment orchestration platforms but offer powerful control for global businesses.
Understanding Settlement Frequency: Timing Matters
Beyond the currency itself, the frequency with which settlements occur also matters. Settlement frequency determines how often funds move from the PSP to your bank account or crypto wallet. Options range from instant, real-time settlement—providing immediate access to funds but with higher fees—to automated schedules like daily, weekly, or monthly transfers, offering predictability and ease of cash flow management. Some merchants may prefer manual settlement, initiating payouts only when it suits their business needs. Your choice here should balance liquidity requirements, transaction costs, and internal accounting processes.
Clarifying Settlement vs. Payout Terminology
Lastly, it's important to distinguish between 'settlement' and 'payout,' terms often used interchangeably but with subtle differences. Settlement refers to the validation and reconciliation of transactions, ensuring that payments are finalized. Payout describes the actual transfer of funds from the PSP to your account or wallet. While these steps are distinct in traditional banking systems due to interbank operations, blockchain-based payments streamline these processes. Understanding this helps clarify the flow of funds and the role your PSP plays in securing and transferring your money.
Conclusion: Align Your Settlement Strategy with Your Business Goals
Ultimately, the way you settle cryptocurrency and stablecoin payments can significantly impact your business's operational efficiency and financial risk management. Whether you prioritize stability by settling in fiat, cost savings by settling in stablecoins, or flexibility through multi-currency models, understanding these options is key to integrating crypto payments successfully. Choosing the right PSP with transparent and adaptable settlement capabilities will empower your business to embrace the future of payments confidently and strategically.
If you are still unsure about the most suitable settlement strategy or how to implement and manage it, a quick and effective way to gain the necessary knowledge is by enrolling in the eLearning course Cryptocurrency and Stablecoin Payments for Businesses from reMonetary. This course offers an end-to-end perspective, covering topics such as the benefits of cryptocurrencies and stablecoins, the conversion process and settlement options, the role of exchanges, a comprehensive overview of the transaction cycle, and the business model and cost structure of a crypto PSP. By the end, you'll have a solid understanding of the crypto PSP landscape, enabling you to make informed, strategic decisions for your organization.
The next article will cover the transaction cycle of cryptocurrency and stablecoin acceptance, examining strategic approaches merchants can take and reviewing concepts such as custody models and settlement options.