Importance of Cryptocurrency in Business

A rising number of organizations throughout the world are using Bitcoin and other digital assets for a range of investing, operational, and transactional objectives. As with any frontier, there are unknown hazards, but there are also significant rewards. Examine the types of questions and insights businesses should think about when deciding whether or not to leverage digital assets.

Why should you think about utilizing crypto?

According to one estimate from late 2020, more than 2,300 US businesses accept bitcoin, which does not include bitcoin ATMs. Bitcoin and other digital assets are being used by an increasing number of businesses throughout the world for a variety of investment, operational, and transactional purposes.

The usage of crypto for business purposes brings with it a slew of benefits and drawbacks. There are unknown hazards and strong incentives, as there are in any frontier. That’s why firms considering incorporating crypto into their operations should have two things: a clear grasp of why they’re doing it and a list of the many questions they should ask.

This article aims to give you and your firm an outline of the types of questions and considerations businesses should make when deciding whether and how to employ cryptocurrency. If your firm intends to participate in cryptocurrency, it’s critical to plan, prepare, and engage thoughtfully.

What can cryptocurrency do for your business?

Here are some of the reasons why some businesses are presently embracing cryptocurrency to get your firm thinking about it:

• Cryptocurrency may open doors to new demographic groupings. Users frequently represent a more cutting-edge clientele that places a premium on transaction openness. According to a recent survey, up to 40% of clients who pay with cryptocurrency are first-time customers, and their purchase amounts are twice those of credit card users.
• Introducing crypto today could help your firm become more aware of this emerging technology. It might also help the corporation position itself in this key developing market, which could incorporate central bank digital currencies in the future.
• Traditional investments that have been tokenized, as well as new asset classes, might give crypto users access to new capital and liquidity pools.
• Cryptocurrency offers several advantages that fiat currency does not. Programmable money, for example, can enable real-time and accurate income sharing while also increasing transparency and facilitating back-office reconciliation.
• More businesses are discovering that critical clients and vendors want to work with them via cryptocurrency. As a result, your company may need to be set up to receive and send cryptocurrency to ensure smooth transactions with key stakeholders.
• Cryptocurrency opens up a new way to improve a variety of more traditional Treasury functions, such as:

1. Simple, real-time, and secure money transactions are now possible.

2. Assisting in the strengthening of the company’s capital control.

3. Managing the risks and benefits of investing in digital assets.

• Crypto could be a good complement or balancing asset to currency, which can devalue over time due to inflation. Cryptocurrency is a viable investment option, and some, such as bitcoin, have outperformed the market over the last five years. Of course, there are obvious volatility risks that must be carefully evaluated.

Primary paths for using crypto

When it comes to incorporating crypto into your company’s operations, the first thing to examine is whether to keep bitcoin on your balance sheet or simply implement crypto-enabled payments. You must carefully assess the best fit for your business objectives to select the proper path for your company. Consider the advantages, disadvantages, expenses, risks, system needs, and other factors. As your firm embarks on its crypto adventure, the following sections will present some broad ideas surrounding two different approaches.

Enabling payments: “Hands-off”

Some businesses only use cryptocurrency to make payments easier. One way to make payments easier is to simply convert crypto to fiat currency and receive or make payments without ever touching it. To put it another way, the corporation is taking a “hands-off” attitude to crypto, which keeps it off the books.

Allowing crypto payments, such as bitcoin, without putting them on the balance sheet may be the simplest and quickest way to get started with digital assets. It may necessitate the fewest changes across the board of corporate functions and may achieve immediate objectives such as attracting new customers and increasing the volume of each sales transaction. Third-party providers are frequently used by businesses adopting this limited use of crypto.

The third-party vendor accepts or makes payments in crypto by converting it into and out of fiat currency on behalf of the company. This may be the most straightforward path to take. And, because the “hands-off” strategy keeps cryptocurrency off the business balance sheet, it’s likely to create minor interruptions to internal activities.

The third-party vendor, which will charge a fee for this service, will handle the majority of the technical queries as well as manage several risks, compliance, and control issues on the company’s behalf. However, this does not necessarily exonerate the corporation of all responsibility for risk, compliance, and internal controls issues. Anti-money laundering and knowing your customer (AML and KYC) regulations still compel companies to pay close attention. They must also follow any restrictions imposed by the Office of Foreign Assets Control (OFAC), the US government’s agency in charge of administering and enforcing economic and trade sanctions.

Enabling payments: “Hands-on”

If a company is willing to go beyond simply enabling crypto payments and intends to broaden crypto adoption across operations and the treasury function—in other words, to go the “hands-on” route—it may find a significant increase in benefits as well as a reduction in the number of technical issues to address.

Treasury will be inexorably linked to these decisions and the reforms that they necessitate:

• Traditional treasury groups manage the company’s funding arrangements (e.g., banking groups, investment partners, third-party working capital providers).
• Treasury evaluates which banking and financial services corporations will require in a potentially wider and bolder digital asset ecosystem.

Final Thoughts

A third-party custodian is used by the majority of companies now adopting crypto in a “hands-on” manner. Given that proclivity, we’ll take a closer look at this path.

Self-custody, the second approach, is more complicated and requires more skill. Furthermore, if the organization takes this path, it will most likely be held more accountable for the work that supports its transactions. That so, much of what follows will apply to corporations that self-custody, if not all.