Everything you need to know about Cryptocurrency:
Should your business take crypto?
You might have overheard that El Salvador had adopted Bitcoin as their legal tender, despite the bearish market. While Cryptocurrency can be dangerous, investment with due diligence and care could lead to profits and revenue. If you are a careful investor and fully understand crypto’s pros and cons, should your small business accept cryptocurrency?
What is cryptocurrency?
Cryptocurrency is a form of digital currency that is an alternative form of payment. Using encryption algorithms, a cryptocurrency can function both as a currency and as a virtual accounting system. A cryptocurrency is also a medium of exchange through an encrypted computer network. Instead of relying on a central bank of a government, it is a decentralised system where two parties verify each other their respective digital currencies. It would eliminate the need for traditional intermediaries such as banks or third-party payment platforms.
A cryptocurrency does not equate with Bitcoin. While Bitcoin is one of the most successful cryptos, it does not mean that all cryptocurrencies are Bitcoins. Bitcoin utilises blockchain technology so that blockchain acts as a public ledger of all the transactions that happen within this network. In short, Cryptocurrencies cut out the middleman in a transaction, and they also minimise the instance of hacking as it would almost be impossible to hack a cryptocurrency.
Should you accept crypto as an SME?
As an SME, you may fear the fragility of a cryptocurrency. There are many benefits of accepting cryptocurrency that you may wish to consider
1. Safer and Better Protection
It could hardly be conceived that the lack of a central intermediary and governmental intervention would lead to safer and better protection for the merchant. Merchant protections are better as cryptocurrencies are genuine like cash. Cryptocurrency received its name because it uses encryption to verify transactions. Not only does it ensure safety and security, but it could also minimise instances of chargebacks as it is simply impossible to have chargebacks from malicious customers as well.
2. Lower transaction fee
Without a central intermediary such as a bank, it would drastically reduce transaction fees. Credit card companies such as Visa, MasterCard, and AMEX typically charge 2-4% of the total revenue. cryptocurrency can be very attractive to SMEs as it could have virtually no transaction fee.
3. Open doors to international buyers
Cryptocurrency enables SMEs to open doors internationally. While you can also use digital payment to open the door overseas, cryptocurrency in theory has no foreign transaction fee, making it very attractive. Those who are unable to access your products and service previously can now directly transact with you as a local merchant. It makes things simpler and easier.
4. Providing extra options for customers
Bitcoin ATM has now been authorised to be in service in Canada. Customers can settle their bills with Cryptocurrency as more and more international customers are willing to use cryptocurrency to dodge transaction fees.
Drawbacks of a Cryptocurrency
There are also some risks where SME owners should consider minimising their risks
1. The volatility of the Market
Volatility is a measure of how much the price of any particular asset has moved up or down over time. Cryptocurrency is highly volatile as it lacks any intervention of a single governmental entity. Cryptocurrency markets are highly speculative. With the absence of an established regulatory regime, cryptocurrencies trade at a more unpredictable rate than stocks and bonds.
2. Regulatory Problem
Currently, Bitcoin and other cryptocurrencies aren't considered legal tender in Canada. However, more and more countries are planning to restrict the trading of cryptocurrencies. In the US, the Biden administration is seeking to tackle is illegal cryptocurrency activity. In common law, cryptocurrencies are considered as property, but not legal tender. It is also subject to property law in Canada. While the legality of cryptocurrencies might be unclear, SMEs can carefully monitor the market to ponder if they wish to adopt cryptocurrencies as their payment method.
3. Technical Problems and lack of support
Credit card companies usually have a support team complimented with a well-developed POS system. Little do we heard of any POS system willing to incorporate Cryptocurrency such as Bitcoin. It has these teething problems that the technical capabilities are still yet not up to date.
How to accept cryptocurrency
If you have decided to give it a try for accepting cryptocurrency, the process is pretty similar to setting up a POS system for credit cards. Companies like Bitpay or Paypal can finance your SME with processors that can accept cryptocurrency. You can also consider using a QR code for payment, just as how it works in China. The payment can then withdraw from your account or change back to legal tender with your bank.
