- There is a growing debate around the implications of using cryptocurrencies as a form of payment over the coming years.
- While highly volatile in terms of trading, cryptocurrencies can offer several advantages to consumers and businesses over other payment methods.
- Cryptos continue to lack the stability that most currencies that are widely adopted should have.
Crypto that was once considered as an asset prone to bubble explosion, has established its position as a valuable asset worldwide amid digitisation trends, and growing investors’ interest to tap the profitable opportunities arising out of price volatility.
Furthermore, businesses are also looking at innovative ways of embedding blockchain technology into their setup, and consequently, the notion of digital currency in the product lifecycle, right from production to final offering, is growing in importance.
During the pandemic, the global low interest-rate environment regime and surge of liquidity delivered a substantial push to the cryptocurrency space, urging traders to look away from interest-bearing investments.
However, the US automaker Tesla’s recent decision to stop accepting Bitcoin as payment for its electric vehicles over environmental concerns, China’s crackdown on cryptocurrency mining, risks to financial stability from cryptos flagged by the US Fed and Iran’s blanket ban on crypto mining for the next few months have turned up the heat on cryptocurrencies.
After a string of these negative headlines, the crazy crypto momentum seems to be fizzling out. At the same time, there is a growing debate around the implications of utilising cryptocurrencies as a medium of exchange over the coming years.
Having said that, let us discuss the potential benefits of using cryptos as a form of payment for consumers and businesses:
What Consumers Need to Know?
While highly volatile in terms of trading, cryptocurrencies like Bitcoin can offer several advantages to consumers over other payment methods. One of them is enabling quick and inexpensive transactions. Usually, standard foreign purchases and electronic transfer involve fees and exchange costs. However, cryptocurrencies stimulate cheap and instant worldwide payments as there is no intermediary institution or government involved.
Meanwhile, digital currencies provide user autonomy, allowing users to control how the way they spend their money without dealing with an intermediary authority like the government or a bank. Cryptocurrencies also allow a user to make payment without disclosing his/her personal information, unlike credit cards and bank accounts that require sharing of personal data.
On top of that, cryptocurrency users are not subject to traditional banking fees, which are generally associated with fiat currencies. Thus, consumers can conduct transactions without paying any account maintenance or minimum balance levies, overdraft charges or any other fees.
Besides, it is hard to neglect the security feature associated with digital currencies. As cryptocurrencies are based on blockchain technology, it facilitates the users to carry out the transactions safely and securely. A reliable encryption technique is used throughout the crypto transaction process to protect tampering the information by hackers. Consequently, cryptocurrencies provide security to consumers conducting transactions.
Despite these benefits, some of the roadblocks in effective payment system through digital currencies demand closer attention. These include cybersecurity issues, price volatility and potential geographic regulations/hurdles.
What Should Businesses Not Miss?
Akin to consumers, businesses can also consider embracing cryptocurrencies owing to some significant advantages.
It is imperative to know for businesses that the transactions made via cryptocurrencies are permanent and cannot be deleted or modified as such currencies are based on blockchain technology. As a result, the chances of fraud can be lowered to a reasonable extent via cryptos.
Related Read: Should organizations pay wages in bitcoin?
At the same time, cryptocurrencies require no bank to verify each transaction, allowing businesses to save a lot of money usually spent on different fees associated with conducting transactions via bank.
Businesses can also expand and open their doors to overseas buyers via cryptocurrencies, for whom their products or services were once inaccessible. Being known as an enterprise that accepts cryptocurrencies can help businesses attract new customers. Particularly, people who want to be in control of their finances, millennials and tech-savvy customers are more likely to show interest in such businesses.
In addition, businesses can distinguish themselves from their competition in the marketplace by accepting cryptocurrencies.
While these advantages persist, businesses should thoughtfully consider volatility risks, regulatory uncertainty and technical barriers associated with cryptocurrencies before taking an exposure.
Although cryptocurrencies like Bitcoin have garnered immense popularity over the last few years, it continues to lack the stability that most currencies that are widely adopted should have.
To become more widely adopted, cryptocurrencies need to be approved and endorsed by governments, which can put in place some stringent regulations to protect consumers and investors who want to buy and use cryptocurrencies. Government protection will help build people’s trust in the digital currency, riding out volatility to some extent.
Besides, the introduction of crypto-specific policies that can help encourage enterprises and individuals to implement blockchain and crypto solutions can stimulate the adoption of cryptocurrencies.