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With the rise of businesses incorporating cryptocurrency into their operations, you’re probably wondering if it’s something that could benefit your business as well. While cryptocurrency certainly has its advantages, there are also a few potential drawbacks you’ll want to consider before deciding if it’s the right move for your business.

A RECAP ON CRYPTOCURRENCY

Cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, control the creation of additional units, and verify the transfer of assets. It’s decentralized; hence, it’s not subject to government or financial institution control.

Bitcoin, the first and most well-known cryptocurrency, was created in 2009. And its popularity has led to the creation of thousands of other cryptocurrencies, including Ethereum, Tether, and Binance Coin. Yet, it doesn’t stop there. Today, there are 21 555 different cryptocurrencies in existence. And the market capitalization of all cryptocurrencies has reached almost $1 trillion. 

Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Currently, approximately 15 174 businesses accept Bitcoin globally, and 2300 of those businesses are located in the United States.

THE PROS OF CRYPTOCURRENCY IN BUSINESS

1. Increased Efficiency and Speed of Transactions

Traditional payment methods, such as wire transfers, can take days to process because they must go through a third party, like a bank or payment processor. On the other hand, cryptocurrency transactions are often confirmed within minutes and sometimes even instantaneously since a decentralized peer-to-peer system eliminates the need for an intermediary to verify the transaction.

So, if you’re conducting business internationally, you can use cryptocurrency as a fast and efficient way to send or receive payments without having to worry about long processing times or hefty fees associated with cross-border payments.

2. Reduced Transaction Costs

Since no third party is involved in cryptocurrency transactions, the fees are generally much lower than traditional payment methods. In fact, Bitcoin transaction fees are currently averaging around $1.30 per transaction, unlike credit card transaction fees, which charge about 3% of the total transaction.

It can be a significant advantage for your business since you can save on transaction fees primarily if you rely on international payments or have to process many transactions daily. 

3. Heighten Security and Protection from Fraud

When you make a traditional credit or debit card purchase, your sensitive financial information is stored on the merchant’s server, where it’s vulnerable to hacking and data breaches. 

Cryptocurrency transactions are pseudonymous, meaning your personal information is not attached to the transaction. Hence, there’s no risk of identity theft and stolen account. Additionally, these transactions are immutable and stored in blockchain, so you can protect your business from fraud or chargebacks when people falsely claim they never received the product or service they paid for and demand a refund from the merchant. 

4. Access to a Global Market

Cryptocurrency knows no borders or banking hours. Therefore, you can conduct business with anyone, anywhere in the world, 24/7. Using this for your business can significantly increase your customer base by opening your market to a global audience and making purchasing your goods or services more accessible and cheaper.

Aside from that, accepting cryptocurrency can show that your business is forward-thinking and on the cutting edge of new technology, which can help you attract new partners and investors. 

5. Alternative Investment Opportunity

Investing in cryptocurrency can be a great way to diversify your investment portfolio. However, the cryptocurrency market’s volatility can be a high-risk, high-reward investment. But if you do your research, have a clear financial mindset, and invest responsibly, it can be a very profitable venture. 

In addition, holding cryptocurrency can also be a way to hedge against inflation. So, if there’s an economic crisis or period of inflation, your investment could potentially increase in value, while traditional investments like stocks and bonds do otherwise. 

THE CONS OF CRYPTOCURRENCY IN BUSINESS

1. Lack of Regulation

The cryptocurrency market is currently unregulated, which can be a double-edged sword. While it gives businesses more freedom to operate without having to comply with stringent regulations, it also means that there’s no governing body to protect you or your customers in case of fraud, theft, or other crimes.

Placing robust security measures to protect your business and customers, such as only dealing with reputable exchanges and service providers and using a cryptocurrency wallet you control, are all intelligent moves. And consider setting up insurance to protect your business from losses due to fraud or theft.

2. Limited Acceptance

While cryptocurrency payment acceptance is growing, it’s still not widely accepted by some businesses, especially brick-and-mortar stores. That means that if you decide to accept cryptocurrency, you may have to convert it into fiat currency to use it in making purchases or paying bills.

It’s also important to note that some countries like China, Iraq, and Russia have outright banned the use of cryptocurrency. So before incorporating cryptocurrency in your business, it’s essential to check the regulations in your country and any countries you plan on doing business with to ensure that you’re not violating any laws.

3. Volatile Prices

One of the biggest drawbacks of cryptocurrency is its volatility. The prices of Bitcoin and other cryptocurrencies can fluctuate wildly, often swinging by double digits in a single day. While this can be an advantage if the prices are going up, it can be a major disadvantage if the prices are going down, as it can lead to losses for your business.

So, if you decide to accept cryptocurrency, convert them into fiat currency (e.g., USD) as soon as possible to minimize your exposure to volatility. Finally, price volatility can also make product/service pricing challenging, so keep up with the latest changes in the cryptocurrency market and adjust your prices accordingly.

4. Complexity of Use

Using cryptocurrency can be complex and confusing for many people. In order to use cryptocurrency, you need to set up a cryptocurrency wallet and purchase some coins or tokens, which can be daunting for people unfamiliar with the technology.

Consequently, you must ensure to have someone on your team who’s knowledgeable about the technology. It will also help if you consider providing customer support in case your customers have any questions or run into any problems. 

5. Scams and Fraud

The cryptocurrency market is rife with scams and fraud due to its unregulated nature. Many unscrupulous people will try to take advantage of gullible investors, and there are many fake exchanges and wallets.  So do your research and only deal with reputable sources.

In addition, Initial Coin Offerings (ICOs) have become a popular way for startups to raise money, but many of them are scams. So before investing in any ICO, it’s vital to do your due diligence and ensure that the project is legitimate.

The Bottom Line

Cryptocurrency is a risky investment, but it can also be a lucrative one. So, it’s crucial to weigh the pros and cons before you decide if it’s right for you. After all, cryptocurrency is still a new and emerging technology, so there’s a lot of uncertainty surrounding it.

But if you’re willing to take on the risk, ensure that you have a solid understanding of the technology and conduct a thorough risk assessment before taking the plunge. With the right precautions in place, you can minimize the risks and maximize the rewards of incorporating cryptocurrency into your business.