Most business leaders fall into one of two categories when it comes to cryptocurrency and digital assets. The first group dismisses it entirely, while the other is more concerned about falling behind the competition and worries that they should be integrating more Web3 capabilities.
Both approaches can be detrimental to your business.
The truth is that a growing number of companies around the world are using Bitcoin and other digital assets for their investment, operational, and transactional needs. And by most accounts, these businesses are enjoying a wide range of benefits that are hard to come by via traditional business services.
But, as with any other tech frontier, there are hidden dangers that you need to be aware of. The real question is not whether cryptocurrency is “real” or if traditional finance will be displaced by crypto tomorrow. The question is whether your business has a framework in place to examine this opportunity rationally.
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What Digital Assets Actually Mean for Your Business
When most executives hear the words “cryptocurrency,” they immediately think of speculation, volatility, and possibly even scams. But the operational reality is different.
How Business Crypto Is Different Than Personal Use
Individual consumers can simply download a crypto wallet (software that serves as a storage mechanism for the cryptographic keys), buy their digital assets, and handle everything themselves. It’s the ultimate financial freedom, as there is no need to involve a middleman. It is one person making all the decisions and controlling the access to the accounts.
The needs of businesses vary significantly. In most cases, multiple people are required to sign off and approve the transactions. There must be audit trails for compliance. Access must be controlled and limited to the role and level of authority. Systems must be able to interface with existing financial and accounting software.
The primary friction arises from the intersection of Web3 and the traditional finance/business worlds, particularly in terms of meeting regulatory requirements.
The Real Benefits Worth Considering
So, given the complications, let’s take a look at some of the main reasons and key benefits that businesses can gain when entering into the crypto space:
More Cost-Effective (And Speedy) Payments
Cross-border capital transfers are very slow and expensive. Businesses typically have to wait several working days for transactions to be processed, and they also face the risk of fraudulent chargebacks, which can impact their cash flow.
Instead, Bitcoin and other cryptocurrencies are usually transferred in 10 minutes or less. The comparative cost of the fees is also striking. Some companies are reporting that they have reduced their international transaction costs by 40% or more.
As a result, it’s estimated that there are now over 6,000 companies accepting Bitcoin as payment, while 77% of merchants cite lower transaction costs as the reason for enabling these payments.
Increased Size of Customer Base
There is a growing demographic that prefers paying with cryptocurrency. When your competitors do and you do not, you are invisible in the eyes of those customers. In fact, 85% of merchants view accepting cryptocurrency payments as a means of reaching new customers they wouldn’t otherwise attract.
Treasury Diversification
Some companies are holding Bitcoin as a hedge against inflation. The hypothesis here is that while fiat currencies experience rapid inflation, such as we have seen over the past five years, deflationary assets such as Bitcoin should hold or even increase value much more quickly. This is undoubtedly more speculative, and it’s a debatable strategy for many, but the rationale holds merit for companies concerned about currency devaluation.
Competitive Positioning in Evolving Markets
In some markets, having crypto as a payment option has become a baseline expectation. Suppose you are in one of these sectors and you don’t offer this capability. In that case, there’s a very good chance you’ll be seen as outdated and inconvenient, resulting in your customers switching to a competitor.
The Risks That Demand Serious Consideration
Now for the challenges that keep CFOs and risk managers concerned.
Volatility Introduces Complexities To Financial Reporting
Bitcoin can and does move more than 20% in a week. If you own crypto on your balance sheet, that volatility becomes a financial reporting problem. For instance, your quarterly earnings could fluctuate significantly based solely on the fluctuations in Bitcoin prices during the quarter. This is one of the primary areas of friction between Web3 and the traditional world.
Regulatory Uncertainty Remains High
The regulatory environment continues to evolve. What is legal and permitted today may not be tomorrow. At the same time, different jurisdictions have different regulatory regimes. International operations introduce additional complexity to compliance requirements.
Security Concerns Are Irretrievable
Traditional finance has mechanisms in place to recover from fraudulent transactions. This provides companies with a safety net and peace of mind, knowing that solutions are available if they do succumb to an attack of some kind. In cryptocurrency, when security fails, the assets are gone forever. That isn’t being dramatic. It’s fundamental to how blockchain technology operates.
Tax And Accounting Complexity Is Multiplied
In most jurisdictions, each transaction produces a taxable event. The accounting department will need to determine costs, calculate gains and losses, and develop appropriate procedures for reporting these results. Most accounting systems are not designed to handle this level of complexity.
The Talent Issue Is Real
It is not easy to find individuals who understand both traditional finance and cryptocurrency simultaneously. You cannot just throw this at the existing treasury finance and expect them to develop expertise overnight. Implementing blockchain and Web3 requires specialized knowledge and experience, which can be hard to come by.
Final Word
The decision whether to opt into crypto isn’t as simple as a yes or a no. It’s about taking a sober assessment of your business to see what makes sense (and what doesn’t).
Will crypto payments give you a competitive advantage? Does holding digital assets fit your risk profile? Do you have the personnel and systems to implement Web3 properly?
For some businesses, that answer will be a slam-dunk yes. For others, it’s a bit more nuanced with a few gray areas. The volatility and complexity may just not be worth the headaches at this moment.
Above all, don’t let the fear of missing out push you in, and don’t write it off completely either. Start small if you do want to move forward. Keep an eye on regulation, and remember that blockchain transactions are irreversible.
Figure out if and how digital assets fit your business. There’s no universal correct answer.
