Recent weeks in particular have shown the unpredictable nature of the cryptocurrency market. The crash of FTX sent shockwaves through the crypto world and left many people facing extreme financial losses. Despite the FTX crisis, the volatility of crypto is nothing new. Over the years, we have seen major rises and falls in the market, and those of us with skin in the game understand that it’s a risky business.
That said, however, it is impossible to ignore the rapid rise of Web3, the metaverse, and DAOs (Decentralised Autonomous Organisations), and that cryptocurrencies go hand in hand with them. In this new age of the web, businesses must decide how they will move forward and navigate the space, and this poses an important question. Should your business accept cryptocurrency payments? Before you make a decision, it’s important to understand the risks of doing so and decide then if it’s a worthwhile endeavour. After all, no business decision is without risk. Let’s take a look at those crypto poses, as well as the potential benefits, of which there are several.
The biggest risk cryptocurrency poses to any business is the highly volatile nature of the crypto market. At any given moment, prices can fall dramatically, endangering your investment. If you were to require funds during a dip in the market, you can lose a significant amount of money. Furthermore, while keeping your money in crypto can protect it from the daily fluctuations a market can experience, you cannot access your money without making a withdrawal, making you subject to whatever state the market is currently in. With such unpredictable and rapid fluctuations, this may not be a safe route for your business to take. Additionally, it is exceptionally tricky to predict long-term behaviour in the crypto market, with experts often coming up with competing predictions. However, it's important to note that businesses can offset some crypto fluctuation risk by swapping currencies such as Ethereum into USD Coin - a stablecoin pegged to the US dollar.
Despite its decentralised nature, many countries still tax their citizens on cryptocurrency. The following countries are among the only ones that have not implemented tax on crypto:
- El Salvador
- Cayman Islands
- Puerto Rico
Potential for cryptocurrency regulation
Lastly, several countries are beginning to bring cryptocurrency under regulation, after many years of being out of the reach of government involvement. This change only further adds to the uncertainty of the crypto market’s future and the accuracy of long-term predictions.
Better payment security
Cryptocurrency payments are a more secure method than debit or credit card payments due to the lack of third-party involvement in the transaction. Fraud and data breaches typically take place inside the centralised hubs via which credit/debit payments are transacted. With cryptocurrency, there is no third-party verification. The customer’s information is stored in their personal crypto wallet. Additionally, every transaction is verified and recorded on the blockchain’s general ledger, making it exceptionally difficult to commit fraudulent activity in cryptocurrency spaces.
Irreversible transactions & less capacity for disputes
A cryptocurrency transaction cannot be reversed. This can be a good thing for disputes, however, if a customer refund is required, the business has to make a new payment back to that customer. Businesses accepting crypto payments, therefore, need to keep a very strict record of all payments. A positive in this irreversibility is that it helps businesses manage a steadier cash flow and means that there are no chargebacks. Refunds are simply a case of making a new payment to the customer, which also requires the business to keep detailed records, which, of course, is beneficial anyway. However, the requirement of manual refund payments can cause a backlog of work for your company which can become a problem, particularly during busy periods.
Fewer fees for business and customer
As it is not based out of any one country or bank, cryptocurrency payments mean less to zero transaction fees to factor in. Cryptocurrency also means businesses avoid international charges, and nobody waits for payments to clear with a foreign bank.
Global customer reach
Cryptocurrency is universal, meaning that the price of a product is the same for anyone around the world. This allows your business and products to be more accessible across the globe, expanding your reach and increasing your sales. Cryptocurrency is also a convenient and attractive payment method for most customers due to the added layer of security and privacy afforded.
There’s no doubt cryptocurrency is a reality all businesses will have to consider at some point. Ultimately, each business owner has to make the choice based on their own requirements and research, and decide whether the risks outweigh the benefits. There is no one right answer, and it all comes down to understanding your specific target customer by implementing marketing and sales best practices. At NEXA, we are ready to achieve this with you.