Is Accepting Cryptocurrency Right for Your Business?
Chris Wheeler ● April 6, 2022 ● 3 min read
The good news is cryptocurrency has entered mainstream financial markets and is no longer the complete unknown it once was. For now at least, it looks like cryptocurrency is here to stay.
Some of the world’s largest brands have jumped on the cryptocurrency bandwagon. Early adopters accepting Bitcoin and other popular cryptocurrencies include Amazon, AT&T, Home Depot, MasterCard, Microsoft, Overstock, PayPal and Starbucks to name a few. However, cryptocurrency isn’t just for the Fortune 500. Nearly a third (32%) of U.S. small business owners currently accept cryptocurrencies for payment or plan to accept crypto in the future. Skynova
Before we dive into the should you or shouldn’t you conundrum, we first need to understand what exactly cryptocurrency is and how it works.
What is cryptocurrency?
In a word, cryptocurrency is virtual currency representing value that can be used to pay for goods or services where accepted. Cryptocurrency is designed to be exchanged online directly between two parties without a financial intermediary. Unlike traditional currency, cryptocurrency is exchanged via a decentralized computer network that isn’t reliant on a central authority such as a government or bank to uphold it.
How does cryptocurrency work?
Ironically, cryptocurrencies work a lot like cash in that they don’t require a financial institution to facilitate the transaction. Cryptocurrency is used to make direct “payments” from one party to another online. Each encrypted transaction goes through a private network of computers and is tracked and recorded via a public blockchain.
Pros and cons of cryptocurrency for businesses
We’ll start by taking a look at the upsides of cryptocurrency, and there are a number of them.
No to low fees or charge backs
For businesses, the biggest advantage of accepting cryptocurrency is likely the cost savings. Cryptocurrency all but eliminates processing fees and charge-backs because transactions occur directly online and are irreversible. Unlike traditional transactions that can involve as many as six parties (i.e. customer, merchant, merchant bank, card network, customer bank and settlement bank), cryptocurrency removes everyone except the merchant and customer from the equation.
Cryptocurrency offers freedom from traditional financial systems. With cryptocurrency, your business can access its digital currency any time without delay, limits or interference. There’s no financial institution or other third party to “hold-up” access, require verifications or dictate when and how much you can withdraw at any given time. The full value of your cryptocurrency is available to your business immediately without exception.
Cryptocurrencies are highly secure because of the level of encryption, removal of multiple parties from each transaction and use of blockchain technology. Blockchains are inherently secure because of their decentralized nature and cryptographic algorithm that prevent fraud and double spending. All cryptocurrency transactions are recorded in a time-stamped digital ledger that’s extremely difficult for hackers to tamper with.
The flipside of accepting cryptocurrencies
Cryptocurrencies are notoriously volatile and susceptible to big fluctuations in value. This uncertainty can be too risky for many small businesses. For businesses that do accept crypto, it’s wise to immediately exchange digital currency for its cash value.
Because cryptocurrencies are relatively new, they’ve been largely unregulated. As usage increases, we can expect this to change and lawmakers to get involved. What the future holds is uncertain—a potential liability for businesses adopting crypto in a pre-regulation world.
Accepting a new form of payment, especially one as new as cryptocurrency can be technically complex. Many small businesses simply don’t have the time, know-how or resources to tackle such a set-up.
There is no clear right or wrong when it comes to adopting cryptocurrency for your business. The best thing businesses can do is stay informed and vigilant. Only time will tell the ultimate fate of cryptocurrency in business and society as a whole.