Bitcoin payments make a lot of sense for small and medium-sized businesses, but the risk still remains

In the last six strange months, the cryptocurrency market has witnessed an unprecedented amount of financial volatility, so much so that the total capitalization of this rapidly maturing area has fallen from $ 3 trillion to about $ 1 trillion. This comes after the industry reached all-time highs across the board in November last year, with Bitcoin (BTC) reaching a price point of $ 69,000.

Despite the previously stated volatility, a recent report shows that small to medium-sized enterprises (SMEs) in nine separate countries, Brazil, Canada, Germany, Hong Kong, Ireland, Russia, Singapore, the United Arab Emirates and the United States, are extremely open. for the idea of ​​accepting cryptocurrency payments – especially Bitcoin.

In the study – which examined a total of 2,250 market units – 24% of those surveyed said that they plan to accept Bitcoin together with other digital assets in the short term, while as many as 59% of participants revealed that they plan to use exclusively digital payments within the start of 2025.

From the outside, cryptocurrencies offer a number of benefits. For example, the issue of reversals or compliance with payment card industry standards is completely subdued when it comes to digital assets. Not only that, acceptance of Bitcoin and other digital currencies can help attract additional business from crypto enthusiasts, as well as potentially multiply one’s profits (since many of these currencies will become more valuable over time).

Does it really make sense to accept crypto for small and medium-sized businesses?

According to Igneus Terrenus, political spokesman for cryptocurrency exchange Bybit, Bitcoin certainly makes sense as a daily medium of exchange for small and medium-sized businesses. He told Cointelegraph that as a payment network, Bitcoin (when used with the Lightning Network) is unequivocally superior to the seven-plus-decade-old credit card system, adding:

Bitcoin on Lightning is disintermediated, has finality built-in, faster, more secure and is many sizes cheaper in transaction cost than the credit card ~ 3% fee. Payment does not necessarily have to be settled in BTC since the Bitcoin network can take dollars, convert them to BTC and transfer it over the network and convert it back into dollars upon arrival. “

When asked about the volatility side of things, Terrenus explained that if seen with a shorter time frame, BTC is undoubtedly a risk for volatile asset. But if you look at a more panoramic view or denominated in relation to inflation currencies such as the Turkish lira and the Argentine peso – which have shown 73.5% and 58% respectively in consumer price index levels in May – it may still be better to maintain purchasing power than most fiats in times of intense volatility / bear markets.

Ben Caselin, head of research and strategy at the cryptocurrency trading platform AAX, agrees with this assessment, and tells Cointelegraph that accepting Bitcoin as well as other more established cryptocurrencies is still the right course of action for most SMEs since it is now is a set of mechanisms for them to leverage large liquidity pools and new demographics without being overexposed to excessive market volatility, adding:

“Current market conditions may be bearish, but the general use of Bitcoin and key crypto infrastructure, including the development of Metaverse, as well as the integration with traditional financial markets continues. For all companies wishing to connect to the crypto ecosystem and economy, this is a good time to pursue such efforts in anticipation of the next phase of the adoption curve. “

The answer may be quite simple

Lior Yaffe, co-founder and CEO of blockchain software firm Jelurida, noted that business owners who want to accept Bitcoin but are afraid of a severe price drop should simply “convert BTC to fiat as soon as they receive it.” In Yaffe’s view, a corporate decision to accept Bitcoin should not be based on short-term price fluctuations, adding:

“Even with all the volatility, there are compelling reasons for small and medium-sized businesses to accept Bitcoin, such as the ability to control funds directly without relying on the goodwill of a third party. Businesses that sell goods and services over the Internet and have problems Using the existing credit card system, companies based in countries where the local currency is extreme, companies that can not work with their local banking system can all benefit from the use of BTC.

Recent: How blockchain can open up energy markets: EU DLT expert explains

That said, he admitted that there is no shortage of problems for entities that accept cryptocurrencies these days, since tax payments and business expenses must be paid in local fiat currencies. As a result, accounting becomes more difficult and expensive, while increased cybersecurity risks also come into play.

Kene Ezeji-Okoye, co-founder and president of Millicent, pointed out exactly the same thing, adding that most cryptocurrencies automatically convert cryptocurrencies to fiat before settling with sellers, making little or no prevailing market conditions. He told the Cointelegraph:

“Goods and services are generally priced in fiat, and when they accept crypto, sellers simply end up with the fiat value of the crypto at the exact time of purchase minus the gateway fees. This may be a better deal than the fees charged by card networks or PayPal, so it makes sense for some sellers to add this option. “

Regarding the problems associated with receiving direct cryptocurrencies, Ezeji-Okoye believes that the most prominent problem affecting digital asset payments is exchange rate volatility. He stressed that this applies to small and medium-sized businesses as it does to nation states such as El Salvador, a country that has seen the value of its Bitcoin holdings fall by half against the US dollar. “In most cases, sellers will have to pay for their cost of goods in fiat currency, so arbitrary exposure to a volatile asset is an extremely risky practice,” he added.

A look at the disadvantages

Vanina Ivanova, marketing manager for non-custodian decentralized financial wallet solution Ambire, told Cointelegraph that accepting highly volatile assets such as Bitcoin as payment can be quite detrimental to a small or medium-sized business since such companies usually have small cash buffers and are therefore vulnerable to instability and fluctuations in the market. In her view, allowing customers to pay in a volatile currency can increase this risk and leave a business exposed to higher risk. She said:

“There are several issues that need to be addressed before crypto is accepted as a common payment option by SMEs – the most important being, in my opinion, the lack of infrastructure. Integrating a crypto payment gateway is not an easy process and there are limited providers offering it as a service.”

In this regard, she noted that Shopify’s recent meeting with prominent cryptocurrency exchange Crypto.com was a major step in the right direction, but due to the fact that most jurisdictions around the world still do not recognize crypto as a legal tender, bank account maintenance for small and Medium-sized businesses can be a nightmare.

Other obstacles in the way of adoption include scalability since although there may be sufficient layer 2 solutions that can make the acceptance of cryptocurrencies fast enough, the problem on a larger scale remains quite clear. Ivanova highlighted:

«Unpredictable transaction costs are also a factor that must be considered. While traditional systems charge SMEs significant fees for payment processing, these fees do not vary and can be included in the pricing. Given that gas taxes are absorbed by the customer when it comes to crypto, companies can lose sales because of this. “

Ezeji-Okoye believes that if a business owner simply accepts BTC to “buy dip”, it is better for them to set up calculated trades on a stock exchange instead of accepting exposure from random purchase volumes to random price levels with money they need to buy supplies.

In addition, it is also not a possible option for sellers to set up a new payment gateway because, given the existing macro environment, it will be difficult for many SMEs to justify their initial investment. He added:

Recent: Crisis in cryptocurrencies highlights industry vulnerabilities

“Accepting cryptocurrencies directly without using an intermediary as a gateway is possible, but risks conflicting with regulators, even in countries where cryptocurrencies are not banned. One of the reasons payment providers charge so much is because they take care of Know your customer and anti-money laundering checks. “

Is there a middle ground to be found?

While Bitcoin is undoubtedly a great option for small and medium-sized businesses, a temporary solution for businesses – until all the curls have been cleared out – will be to accept stack coins. These types of assets allow business owners to reap all the benefits of blockchain technology, while not offering any of the risks of daily volatility.

In fact, people like Ivanova believe that stablecoins can help speed up the use of cryptocurrencies, which in turn can alleviate various technological and legal barriers to crypto. At this point, it is worth noting that the UK government recently announced that it plans to introduce stack coins in its regulated payment system, which comes as good news for SMEs as it gives them a new low-fee, regulatory-compliant and stable method of accepting crypto payments.

Therefore, with the global economy rapidly moving towards the use of digital currencies for daily transactions, it will be interesting to see how the future of this space plays out, especially as more and more businesses become more adept at handling cryptocurrencies.