Coinbase Commerce, the cryptocurrency payments solution of U.S.-based exchange Coinbase, has removed support for bitcoin payments using self-custody wallets. Brian Armstrong, CEO of the exchange, clarified it maintains support for payments from UTXO-based chains from Coinbase accounts. However, Commerce will focus on supporting ERC-20 tokens on layer 2 protocols, like Base and Polygon.

Coinbase Commerce Removes Self-Custody Bitcoin Payments, Embraces Layer 2 Solutions

Coinbase Commerce has ditched bitcoin payments from self-custody wallets due to the difficulties these present for Coinbase’s processes. The measure, which extends to other UTXO-based chains like Bitcoin Cash, Litecoin, and Dogecoin, marks a pivot in Coinbase’s vision of payments.

Lauren Dowling, product lead for Coinbase Commerce, explained this change derived from implementing a new system that uses Ethereum Virtual Machine (EVM) and smart contracts to address a series of inefficiencies in its payments stack. These included asset volatility, solving incorrect payment amounts, and limited support for cryptocurrency assets.

Dowling detailed that this new system, which supports several assets across EVM chains and layer 2 solutions like Base and Polygon, automatically converts payments received on whichever currency to USDC, a dollar-pegged stablecoin, to ensure a guaranteed exchange rate for merchants.

She stressed:

Delivering these same capabilities on the Bitcoin blockchain without smart contracts and stablecoins was challenging & we therefore made the difficult decision to remove native Bitcoin & other UTXO support.

Nonetheless, Coinbase CEO Brian Armstrong clarified that customers could still make payments using UTXO-based assets from Coinbase accounts, given that these payments occur offchain and are free and instant. Dowling also remarked that the exchange is open to offering new ways of enhancing users’ experience, including the implementation of the Lightning Network, Bitcoin’s scaling layer, and Solana as payment rails.

However, Armstrong clarified that the exchange will focus on including layer 2 solutions as part of its payment stack. “We believe paying with crypto is going to primarily happen on layer 2 in the future and we want to help make that happen,” he concluded.