The U.S.-based cryptocurrency exchange Coinbase, through Coinbase Commerce, has discontinued supporting bitcoin payments using self-custody wallets. The exchange’s CEO, Brian Armstrong, made it clear that payments from Coinbase accounts to UTXO-based chains are still supported. But Commerce’s primary goal is to support ERC-20 tokens on layer 2 protocols, such as Polygon and Base.
Coinbase Commerce Adopts Layer 2 Solutions in Place of Self-Custody Bitcoin Payments
Because using self-custody wallets for bitcoin payments presents challenges for Coinbase’s operations, Coinbase Commerce has decided to drop this feature. This represents a significant change in Coinbase’s payment strategy, as it affects not only Dogecoin but also Litecoin, Bitcoin Cash, and other UTXO-based chains.
Coinbase Commerce’s product lead, Lauren Dowling, described how this modification resulted from putting in place a new system that addresses a number of inefficiencies in its payments stack by utilizing smart contracts and the Ethereum Virtual Machine (EVM). These included fluctuating asset values, fixing improper payment amounts, and having little support for assets related to cryptocurrencies.
According to Dowling, in order to guarantee an exchange rate for retailers, this new system automatically converts payments received in any currency to USDC, a stablecoin pegged to the US dollar. It supports several assets across EVM chains and layer 2 solutions like Base and Polygon.
She emphasized:
We had to make the painful choice to discontinue native support for Bitcoin and other UTXOs since it was impractical to provide these same features on the Bitcoin blockchain without smart contracts and stablecoins.
However, as long as the payments are frictionless, instantaneous, and take place offchain, Coinbase CEO Brian Armstrong made it clear that users could continue use UTXO-based assets from Coinbase accounts. Additionally, Dowling stated that the exchange is willing to consider new ideas for improving the customer experience, such as using Solana as payment rails, Bitcoin’s scalability layer, and the Lightning Network.
Armstrong did clarify, though, that the exchange will prioritize integrating layer 2 solutions into its payment stack. “We think that layer 2 payments will be the main way that cryptocurrency is paid in the future, and we want to help make that happen,” he said.
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