The Pros and Cons of Cryptocurrency as a Payment Method for Small Businesses

Cryptocurrencies have changed our financial outlook in many ways by giving us a way to move digital funds swiftly across the planet, as well as providing a volatile investment option. Small business use is one area where perhaps the potential of cryptos hasn’t yet been as fully explored as it could be. What are some of the key areas that you should be aware of when assessing this method of receiving payments?

Lower Fees but Higher Volatility

One of the biggest benefits of digital currencies is that they can be used to send money almost instantly and at very little cost. According to Bitget, demand, block size and speed, and the consensus mechanism used are the key factors in setting each token’s network fees. They mention XRP, XLM, and Nano as being among the tokens with the lowest transaction fees.

The volatility aspect is one of the issues that may worry business users. Bitcoin is the largest token and has a 30-day volatility index of 30.98% at the time of writing, as listed by Blockforce Capital. While Bitcoin’s volatility appears to be dropping when compared to historic data, the current level is still likely to be too high for some companies to take the risk of losing money. Thankfully, stablecoins like PayPal USD and USD Coin offer many of the benefits of cryptos without the volatility. 

The Ever-Changing Regulations

Mainstream adoption of cryptocurrencies is still relatively new despite the fact that Bitcoin has been mined since 2009. This means that there are still regulations being put in place and amended across the planet. One example at the time of writing involves the first White House Crypto Summit called by President Donald Trump to discuss future regulations in the US.

There are currently several types of crypto licenses a small business might need. A crypto exchange license is required for those companies that offer crypto trading services or allow users to change crypto to fiat money or other tokens. An ICO license is needed to carry out an initial coin offering on a new token, while a crypto mining license is the right choice for a business looking to mine digital tokens.

Security Issues and the Risk of Hackers

The ‘crypto’ in cryptocurrencies comes from the word cryptography, which is the process of making sure that sensitive information is coded so that it only gets seen by the intended receiver. This helps to explain why these tokens are so secure, with blockchain tecnhology making it almost impossible for hackers to intercept or hack individual wallets or transactions.

However, the list of the biggest crypto hacks of all time confirms that the recent attack on the Bybit exchange was the most substantial of all time, with $1.4 billion involved. While hackers are increasingly sophisticated, most of the cases involve an element of human error, such as someone falling for a phishing attack. If a business has strong security processes in place and updates its software regularly, there is no reason to believe that their wallets are at risk.

Each small business owner should weigh up these advantages and disadvantages to get a better understanding of whether using cryptocurrencies is the right move for them.