Since 2009, when Satoshi Nakamoto first released Bitcoin, cryptocurrency has been a significant financial trend. Despite the global financial crisis of 2020, cryptocurrency continued to grow even as the crash impacted it.
The cryptocurrency market has seen a significant shift in investors and traders from fiat money to crypto over the last year. But How Businesses Can Reap The Benefits Of Cryptocurrency, They have proven themselves to be a stable and good alternative investment.
Businesses need to go digital in a world where everything adapts to the virtual space to make it more accessible to consumers. Cryptocurrencies, and the technologies that support them, are more than capable of helping them do this and staying ahead of the rest.
Cryptocurrencies offer many benefits and are not just used for payment.
The Primary Qualities of Cryptocurrencies Business Can Benefit From:
The primary characteristics of cryptocurrency can be used to meet the needs of many businesses, including-
1. Cryptographically Secured Cryptocurrencies offer you maximum security.
2. Decentralized: The majority of cryptocurrencies are decentralized. This means that a network of nodes located in different locations is responsible for network administration, not a centralized authority. Hackers have an infinitely more challenging job because there is no central repository of information.
3. Immutability: Once transactions are made using cryptocurrencies, they cannot be reversed or altered. Instead, records of all transactions are stored on blockchain ledgers forever. Blockchains are intrinsically immutable.
4. Anonymity: All crypto users who use blockchains have a unique address that allows them to participate in crypto trades using their digital signatures (similar to social media usernames). This will enable them to remain anonymous and protects their financial and personal information.
5. Cost-effectiveness: There are no intermediaries or centralized institutions to pay cryptocurrency.
6. Smart Contracts: This is one of the unique advantages of crypto. Smart contracts are self-executing contracts stored on top blockchains and executed when all terms and conditions are met. Another reason that cryptocurrencies can be so secure is that they are self-executing.
How Businesses Can Reap The Benefits Of Cryptocurrency
Here are some reasons why companies are using crypto to spark their interest:
- Cryptocurrency may open doors to new demographics. Crypto users often represent a cutting-edge clientele who value transparency in transactions. A recent study showed that as many as 40% of crypto-paying customers are brand new. Their purchase amounts are also twice the amount of credit card users.
- Introducing crypto immediately may increase your company’s internal awareness of the new technology. This could also help your company position itself in the emerging central bank digital currencies market.
- Crypto could allow for access to capital and liquidity pools via traditional investments that are tokenized as well as new asset classes.
- Crypto offers many options that are not possible with fiat currency. Programmable money, for example, can allow real-time revenue sharing and transparency that will facilitate reconciliation in the back office.
- Companies increasingly realize that vendors and clients want to use crypto to communicate with them. To ensure smooth transactions with critical stakeholders, your business might need to be able to receive and pay crypto.
- Crypto can be used to enhance a variety of traditional Treasury activities such as:
- Allowing for simple, secure, real-time money transfers
- Helping to strengthen control of the capital in the enterprise
- Digital investments: How to manage the risks and how to seize the opportunities
- Crypto could be used as an alternative or balancing investment with cash. However, it may lose value over time due to inflation. Crypto can be an investment asset, and some of them, like bitcoin, have done exceptionally well in the last five years. Clear volatility risks must be carefully considered.
There Are Two Main Routes To Using Crypto.
When considering using crypto in your business operations, the first question is: Are we holding crypto on our balance sheet? Or are we simply using crypto-enabled payment systems? You need to consider the best path for your company carefully. You should consider the potential drawbacks, costs and risks, and system requirements. These sections provide a broad overview of two possible paths your company can take as it embarks on its cryptocurrency journey.
Allowing Payments: “Hands off.”
Many companies use crypto to facilitate payments. To reduce expenses, you can convert crypto to fiat currency to receive or make payments. The company has adopted a “hands-off approach” that keeps crypto out of the books.
It may be the easiest and most efficient way to get started with digital assets. This may not require any adjustments to the corporate functions, but it may be the most effective way to reach new clients and increase the volume of sales transactions. Enterprises that rely on third-party vendors often adopt this limited use of crypto.
As an agent for the company’s third-party vendor, they accept or make payments in crypto via conversion into and from fiat currency. This is the easiest option. This approach, which is “hands-off”, keeps crypto off the corporate balance sheets, which may be the best option.
This third-party vendor will charge a fee to handle most technical questions. They also manage a variety of compliance and control issues for the company. However, this does not automatically mean that the company is free from responsibility for internal controls, risk compliance, and compliance issues. Companies must still pay attention to anti-money laundering issues and know their customer (AML) requirements. They must also comply with any restrictions imposed by the Office of Foreign Assets Control, the US government agency that enforces trade and economic sanctions.
Allowing Payments: “Hands on.”
A company willing to do more than enable crypto payments and wants to expand crypto adoption within operations, the treasury function, or to go the “hands-on” route may find significant benefits in addition to reducing technical issues.
The corporate treasury may consider several preliminary issues to prepare itself.
- What is the company’s goal in adopting crypto?
- What steps has the treasury taken to acquire the required knowledge to receive, monitor, and manage crypto payments?
- Do you think treasury should have custody of crypto or outsource it to a third party?
- Are there any measures or thoughts that could be taken to invest in crypto as an asset class?
- What adjustments can the treasury anticipate in anticipation of central banks issuing digital currencies?
Treasury will be involved in these decisions and the changes required since:
- Traditional treasury organizations maintain financing relationships for the company (e.g. investment partners, bank groups, and third-party working capital providers).
- Treasury determines which types of banking and financial services–now in a potentially broader and bolder digital asset ecosystem–corporates will need.
A company can choose to adopt crypto more “hands-on”. There are two options:
- To keep the crypto assets safe and secure, you can use a third-party vendor to manage your wallet.
- Integrate crypto into company systems and manage private keys. Consult your lawyer to find out if a license is required for crypto transmission.
Most companies that use crypto in a “hands-on” manner have a third-party custodian. We will explore this route in more detail due to that tendency.
Self-custody is more complex and requires more incredible experience. This route will also likely require more responsibility for its transactions. However, many of the same principles will apply to companies with their custody.
Although cryptocurrency is not as widespread as credit card payments, it has many benefits for consumers and businesses.
These benefits are worth exploring by businesses. Businesses should also shift their business models to accept cryptocurrency payments. In the months and years ahead, there will likely be an increase in the number and types of businesses willing to adopt blockchain payments. Traditional industries like moving companies and laundromats interacting with customers daily can also adopt cryptocurrency payments. The benefits of blockchain technology aren’t limited to specific verticals or company sizes. Any business can and should take advantage of cryptocurrency’s growing popularity and trust.