What Is Cryptocurrency and Should Your Business Accept It?
The latest trend hitting the market and skyrocketing forward is the use of cryptocurrency, especially Bitcoin. As a business owner trying to stay current with the time, you may be considering a cost-benefit analysis of accepting Bitcoin or other forms of cryptocurrency as a payment method for your goods and services. Although cryptocurrencies hold promises to make transferring funds easier without a third party such as the government or a credit card company, their highly volatile nature disincentives their profitability within small businesses.
Cryptocurrency is a decentralized network containing digital currency, all based on blockchain technology. Their decentralized structures enable them to exist outside of government and central authorities’ controls, interference, and manipulation. It is almost impossible to counterfeit or double-spend cryptocurrencies because of their blockchain digital skeleton, which is their record-keeping system, known as an electronic ledger.
There are thousands of different blockchain-based cryptocurrencies, but the first, largest, and most famous is Bitcoin. Bitcoin’s popularity and success in the market, without being backed by banks nor governments, has opened the conversation to allowing Bitcoin transactions in small business settings. The question is, should your small business allow Bitcoin too?
Benefits of Accepting Cryptocurrency
· Reduced transaction fees – Since cryptocurrency does not have a third party to back it, businesses do not have to pay a transaction cost as they do for accepting credit card payments. The elimination of the middleman makes transactions easier, more secure, and cheaper.
· Increase of sales – Accepting cryptocurrency as a form of payment opens the door for customers to have an additional way to shop with your business. This allows business owners to expand their shop on the international level, giving buyers access to goods and services they now have the means to pay with.
· Strong security – Cryptocurrency’s decentralized foundation protects merchants and customers from fraudulent chargebacks. Both parties can rest assured knowing the reliable encryption technique is specifically guarded against hackers and cybercriminals who would tamper with sensitive information.
Costs of Accepting Cryptocurrency
· Cryptocurrency volatility – The price volatility of cryptocurrency makes it extremely unpredictable, which could create potential havoc for your business. For instance, in 2009, one Bitcoin was measured in pennies, yet skyrocketed to over $19,000 per coin 10 years later in 2019. By keeping Bitcoin as cryptocurrency, businesses would be gambling respectively with their revenue as a speculative investment, rather than turning that immediately into cash reserves.
· Susceptible to illegal transactions – Since cryptocurrency holders can remain anonymous online, it leads to the opportunity for illegal transactions to take place. Bitcoin has had an infamous reputation as a refuge for scoundrels, even though it has taken to Wall Street.
· Literal obstacles– Cryptocurrency is not a tangible form of payment like swiping a credit card or handing over cash. Businesses need to invest in an application such as BitPay, which enables the buying and exchanging of Bitcoin. With this comes a new responsibility for your employees to understand how to set up and use BitPay. It also requires following through with miscellaneous tasks to keep up with Bitcoin’s intangible nature, such as online passwords and securing hardware. A regular cash register would no longer be the only equipment needed to perform customer payment transactions.
Cryptocurrency adds a new cutting-edge form of payment for your business. It can attract new customers and increase sales, reduce transaction fees, and provide a secure payment method against hackers. However, there are still drawbacks to consider, as it is highly volatile and holds pervasive illicit activity. Allowing cryptocurrency as a payment option is not a one-size-fits-all answer. Each business should weigh the benefits and the costs according to their own business standards to see how the use of cryptocurrency could potentially harm or enhance their shop.
DYE CULIK PC is a Charlotte, North Carolina law firm. Our attorneys represent small businesses and franchises for all their needs including problem-solving, litigation, and dispute resolution. Contact us if you need help or legal advice for your small business. Follow us on Instagram for the latest updates on CLT small businesses.