You know, I could really see donations being a more popular scenarios than crypto is more popularly viewed as an investment today. This could be very similar to someone donating their investment portfolio of stocks or bonds to the university.

Welcome to Focus, a podcast dedicated to the business of Higher Education. I'm your host, Heather Richmond, and we will be exploring the challenges and opportunities facing today's higher learning institutions. In this episode, I'm excited to introduce our guest Gloria Rismondo, Senior Director of Product Strategy at Global Payments. Gloria is going to educate us on cryptocurrency and discuss what to consider when accepting crypto for higher education payments. Hi, Gloria, I am so excited to have you join me today on a topic that I think will be very beneficial for our listeners in higher education.

Well, thanks for having me.

You know, we're here to talk about cryptocurrencies and I have so many questions. But before we dive in, can you tell me just a little bit about your background in payment technology?

Most of my career has been in the payments industry across all aspects of payments. I've been at Global Payments for 11 years, focused on new innovations and product strategy. So I'm currently part of the Global Payment Strategy Team where I research new technologies and assess how they impact our merchant solutions business.

That's awesome. And I know you and I have worked together on many things. And so I appreciate all your research that you do on that. And I know for a fact that you're the right person to talk to today about cryptocurrencies.

Thank you. This can be like cryptocurrency, 101 course. I'll try to break this complex topic down just you know, to give universities the basics of what it is and how it works.

That sounds perfect, because I know that crypto has been around for some time now, and certainly in the news quite a bit. But there's just still seems to be a lot of unknowns surrounding this topic. So can we start with just a basic overview like how do you define cryptocurrency?

Cryptocurrency is a digital currency. So if you think of a currency is a representation or a store of value, this $20 Bill right here has value only because you and I, and everyone else believes that it has value and so therefore we can buy/purchase, you know, goods and services with it. And so cryptocurrency is a digital currency, it's a currency, a store of value, that's digital, there's no physical coins or paper to represent the value. There's really only a digital record of value that's stored online.

Okay, and then we believe has value.

Correct? Correct. 

Well, and I know you know, you hear a lot of names thrown around to reference a cryptocurrency such as obviously the popular one Bitcoin. But so are there differences and why are there so many names?

There are 1000s of different crypto currencies or crypto tokens out there. Bitcoin is the original and the most popular and it is important to know the basic types of cryptocurrencies, because the riskiness varies between them, right? There are three basic types of cryptocurrency. The first is decentralized. Bitcoin falls into that category, Ether (Ethereum Blockchain) cryptocurrency falls into that category. It is not issued or managed by any one group, the value is only based on what someone else is willing to pay for it. And that value can be volatile. You know, Bitcoin about a year ago was at a high of about $76,000 for one Bitcoin. And now it's like around $20,000. You can see how it can be very volatile, that's decentralized. The second type is a stable coin. Examples of that could be Tether (USDT) or DAI. That type of cryptocurrency is actually issued by a private entity or group. And the value is tied to something else of value such as like a fiat currency or an algorithm. And that is in an attempt to avoid the wild swings in value. Okay. In some cases, they may have a collateral reserve a fiat currency or other assets for the value of any coins that they issue. But the important thing to remember about stable coins is they're not all the same because they are pegged to different assets. And so the security of a stable coin is really only as good as the group and the collateral supporting it. And then the third type is a central bank digital currency. This is a CBDC and it is where the central bank of a country issues a digital currency, very similar to how they issue that country's fiat currency. So, the riskiness of this currency is basically the same as the fiat currency issued by that country's government. So there's about nine countries right now that have fully launched a central bank digital currency, including Nigeria and the Bahamas. So the Bahamian dollar is just as risky or as safe as you would consider the Bahamian digital dollar, or digital currency. There are a lot of countries looking into this. Fourteen countries are piloting it, including China and South Korea, and then, just about every other major country in the world is either looking at it or researching it or considering it, including the US.

Wow, so that actually kind of makes sense and breaks it down to three types. And so make sure I'm understanding this right that so regardless of the type of cryptocurrency, they're all digital based currency. And so how does that technology work?

Well, most cryptocurrencies are stored on a blockchain.

Ah yes, blockchain I've heard that term a lot. So I think it can be used for different means. So let's talk a little bit about what does blockchain mean exactly?

So blockchain is a technology and it's the technology that supports most digital currencies. A blockchain is essentially an online, public, distributed ledger. That's a mouthful, right? So think of a ledger book that's, you know, red leather covered, it's got a record of all the transactions, right? So then put that online and make it public. So then anybody can view it, and now make it decentralized where no single entity owns it. So no single entity has the ability to add or make changes to it. So that's a decentralized or distributed public ledger. So a transaction or group of transactions is called a block. And that can't be added to this ledger or the blockchain, the chain of blocks, unless multiple different independent entities in the network, each process that transaction and agree that that change is accurate. And once that transaction is added to the blockchain, it can't be changed. It's immutable. Okay, so let's just say an example of Bitcoin. And I'm going to propose a transaction I'm going to send you two Bitcoin. So entities who are using their computer power to support the Bitcoin Blockchain, they are called miners, and mining they pull that transaction and they process it. They're validating the legitimacy of that transaction. And if they all match up, then it is added to the blockchain and the transaction is completed and you now have two Bitcoin. You know, the benefit of using blockchain technology is that it solves problems of record keeping and it creates a public audit trail for cryptocurrency payments.

Yet it kind of seems like there really is a level of security built in by not having a single source by having multiple entities come in and have to validate the accuracy, would you say?

That is one of the things that people love about blockchain technology and what makes it such a good technology to be used in other areas as well besides cryptocurrency.

It makes a lot of sense. So now we understand the blockchain technology. So now let's talk about how does cryptocurrency work in real life? How does one go about getting cryptocurrency?

So you can either buy it or mine it. Mining, like I mentioned before, the miner to process the transactions, it's a very technology focused and energy heavy endeavor. So I would say in general, most people are going to buy. So you buy cryptocurrency on an exchange, so Binance or Coinbase or FTX, are all examples of exchanges, so you pay US dollar or other fiat currency to buy your crypto, you can even pay with your credit card or a bank withdrawal.

And so then are there fees involved with that?

Yes, you do have to pay gas fees. Okay, that's actually the term used for paying for the cost that it takes to run and support the blockchain. That's the fee that gets paid to those miners who are processing the transaction.

So it really is like gas like I have to power my car to drive. I have to power the blockchain, too. 

I guess that's where they came up with the term.

Okay, so I bought my crypto, I paid my gas and so once we bought it, what do we do with it now?

So you’ve got to store it somewhere. Well, that's a little bit of a misnomer because your actual cryptocurrency is actually stored on the blockchain, right? It's out there in the blockchain, but you access it with your private password called a private key. So within blockchain, there's a public key and a private key. The public key is kind of like your username that you give to others who you're going to do a transaction within crypto. And your private key is like your password. But this is not really like your usual password. A private key can be over 200 digits long, or it could be in hexadecimal code. I mean, it's not something you are going to remember. So it's important though, because your private key is all you have to claim your cryptocurrency. And if you lose it, you may lose your cryptocurrency. You want to store your private key in a secure location. And there are wallets, so there's a physical wallet if you are advanced enough, you can use a physical wallet, it's a noncustodial wallet, you save your own private key on like a thumb drive or a computer or some kind of other physical device. What's more commonly used is a commercially available custodial wallet like, traditional or typical wallets like Venmo, Cash App and PayPal. They have cryptocurrency capability within their wallets or there are specific crypto apps like Coinbase. And these wallet services, save your private key information for you. And basically create ease of use for you through the app. And these wallets also make it easier for you to spend or exchange your crypto as well.

Very interesting. So I could Venmo you some crypto with my private key and you can access it via the public key and your private key if I… I think I've got it. I think I've got it Gloria. 

You can teach the crypto 101 course now.

Oh, wow. There's a lot to absorb. But you are breaking it down quite nicely, which is great. So now let's go the flip side. So I figured out how to buy and exchange. But let's say a merchant, one of our colleges or universities, they want to accept the crypto payments, where do they even start?

Well, I would tell them, first of all, think of their audience, right? Will they have crypto? Will they want to pay in crypto? What will they be willing to spend crypto on? Think of things like tuition, season tickets, larger purchases, might be more likely to have a crypto be spent on them. Cross border could also be good candidates. Cross border cryptocurrency simplifies that transaction. There is no me going to my bank trying to get a wire to be sent to the university's bank. It's basically like a simple online transaction to send cryptocurrency, cross border could also be a good candidate. I would say right now for small fee amounts crypto is not really being used a lot for spending small dollar amounts. A lot of people due to the volatility and value are considering cryptocurrency to be in an investment and so they're not really spending it for small things. If you consider that I were to buy a pizza right now with Bitcoin. And by the time that I get that pizza, bring it home and eat it. Bitcoin may have changed so much that I might have just bought a $300 pizza.

That's a really good example. So the small transactions, probably not where you want to kind of delve into crypto right away.

Not right now. Yeah, seems to not be the most popular use of crypto.

Yeah. Now what about donations? I'd say that what I've heard when I talked to campuses that the area they are looking at is possibly accepting crypto for in their foundation or their alumni office for donations.

Yes, I could really see donations being a more popular scenario in crypto. It’s more popularly viewed as an investment today. So this could be very similar to someone donating their investment portfolio in stocks or bonds to the university.

Okay, that makes a lot of sense, and especially the fact that you could potentially hold on to it and decide when you want to convert them. So how about what else should they be considering if they're really kind of looking into accepting crypto?

Well, one is tax implications. In the US, the government views it as an asset. And so if the value in the cryptocurrency changes from the time you receive it to the time you spend it, or cash it out, if it increases, for example, you will pay taxes on that difference on that gain, if you will. So that's one aspect. Crypto value volatility has to be considered whether or not you're going to hold the crypto and deal with the volatility or cash it out. And if cashing it out, you have to consider the gas fees and the exchange service rates that go along with that as well. You know, the timing of transactions in the blockchain really are not that fast right now, either, depending upon the cryptocurrency and the traffic in the blockchain, transactions can take from 20 minutes to several hours. So that that changes things when you're trying to give someone a confirmation of their purchase, or of their payment on the website. You can't give an immediate confirmation of the transaction like you can with a credit card payment, because of the length of time it takes for a transaction to really go all the way through. And then there's the interoperability or lack thereof, between the different cryptocurrencies, because there are so many it really does take, you go into an exchange to convert from Tether or Ether to Bitcoin, for example. And then there's the management of this transaction. So there's different anomalies that can happen, someone can double spend and the amount in their wallet because it does take a while for a transaction to go through, I can spend more than a trillion in my wallet, and whoever is the last transaction to process they don't get their cryptocurrency, I can also overpay or underpay if the value of the cryptocurrency changes. So there's management of those transactions that needs to happen. You've got to be able to have someone working a queue of transactions where those scenarios happen. And then you've got to also consider are all of those things worth it if you don't have enough customers that want to pay with crypto? So you kind of balance that business decision.

It does sound like there's quite a little bit of overhead. So if you're paying for that, to get that all up and going, and then you have your one person who's willing to give you a donation that probably depends on how big it is. In crypto, you have to balance. So it sounds like if you're looking to accept crypto, you really need to look at more of your long term strategy for managing, managing it and keeping, are you looking at an investment? Are you cashing out immediately? You know, is that another piece they need to look at?

Oh, absolutely. So, if you're accepting crypto at a university, you might look at it as another investment. If it's in the university foundation, you could look at it as an investment portfolio with crypto and you might want to hold a crypto wallet and manage different types of crypto’s in that wallet as investments. Or, you can convert the crypto immediately into a fiat currency like US dollar or whatever your currency is. And that's the easiest and lowest risk way to accept cryptocurrency. You eliminate a lot of the volatility and the value, really, you're paying gas fees, and then you're paying a fee to the provider who manages and exchanges that crypto for, you managing that process for you.

Gotcha. Wow, there's really so much to consider, I can absolutely see how this can be really overwhelming. So, thinking about if a school's looking maybe to start a plan to consider this what type of resources are out there to help higher ed institutions navigate accepting cryptocurrencies? And how can they get started?

Well, if the school wants to accept crypto and immediately exchange it for US dollar or other fiat there are service providers to help with that. I would tell the universities to contact their payment processor to see if they have a partnership with a crypto service provider that would handle that. If you want to go beyond that and manage a cryptocurrency portfolio or accept crypto for additional or smaller transactions, I would say educate yourself, educate yourself on the tools like wallets and exchanges, educate yourself on the trends and the most popular cryptocurrencies and then really determine a crypto policy that is in line with your organization's risk tolerance.

That's great advice, Gloria. Thank you so much. This has been incredibly helpful to understand the basics of the payment topic that I know has a lot of questions around it. So are there any other tidbits that we should pass along to our higher ed listeners?

Ah, well, there's always regulation. Regulations are ever evolving, and particularly with something like cryptocurrency. So, there has been significant fraud and theft in cryptocurrencies and governments are challenged with how to protect people. So, I would say be on top of what regulations are happening with regard to your country. The US Federal Government views cryptocurrency as an investment and taxes it accordingly. The European Union, they actually just approved the MICA regulation, the market in crypto assets that governs stable coins, the stable coins is one of the three types that we talked about. So they're governing stable coins, you have to have a stable coin that's pinned to the euro with one for one collateral reserve. So I am sure that's just a sample, I'm sure that more regulations are to come as well as cryptocurrency evolves.

I bet if there's anything we know in the payments industry, Gloria it is that there will always be regulation that will evolve. Well, thanks so much, Gloria. What a wealth of information you've been today. 

Well, it was my pleasure, Heather.

I know with our audience being higher education. We all love to learn more. And we for sure learned something today.

Thanks for tuning in to this episode of Focus. Don't forget to subscribe so you can stay up to date on the business of higher education. For more information, check us out at TouchNet.com.