A growing number of businesses worldwide are now using Bitcoin and other digital assets to fund a variety of operational, transactional, and investment purposes. It’s also becoming a regular part of sports news, with more sportsbooks accepting digital currency. There are risks and rewards, as with all frontiers. Consider the questions and insights that enterprises need to ask when deciding whether or not to use digital assets.
According to a recent estimate, more than 2,300 businesses accept Bitcoin. This doesn’t even include Bitcoin ATMs. A growing number of businesses worldwide use Bitcoin and other digital assets to fund, operate and transact.
More Opportunities Arriving
There are many opportunities and challenges that crypto can bring to your business. There are unknown dangers as well as strong incentives. Companies looking to incorporate crypto into their business should have two things. They need to have a foundation of how crypto works and they need to have a complete plan for transactions.
Even then, there are additional considerations. Getting started with cryptocurrencies presents challenges, but they can all be overcome with a little due diligence.
How Crypto Can Help Companies
Cryptocurrency may open doors to new demographics. Crypto users often represent a cutting-edge clientele who value transparency and trust in their transactions. A recent study revealed that as many as 40% of crypto-paying customers are brand new customers. Their purchase amounts are also twice the amount of credit card users.
Introducing crypto right away may increase internal awareness within your company about the new technology. This could also help your company position itself in the emerging market for central bank digital currencies.
Crypto could allow for access to capital and liquidity pools via traditional investments that are tokenized as well as new asset classes.
Crypto offers many options that are not possible with fiat currency. Programmable money, for example, can allow real-time revenue sharing and transparency that will facilitate reconciliation in the back office.
Companies are increasingly realizing that vendors and clients want to use crypto to communicate with them. To ensure smooth transactions with key stakeholders, your business might need to be able to receive and pay crypto.
Two Main Routes to Using Crypto
When considering the use of crypto in your business operations, the first question you should ask is: Are we holding crypto on our balance sheet? Or are we simply using crypto-enabled payment systems? You need to determine which path is best for you and your business.
You should consider the potential drawbacks, risks, costs, benefits, system requirements and other factors. These sections provide a broad overview of two possible paths your company can take as it embarks on its cryptocurrency journey.
Allowing “Hands-off Payments”
Many companies use crypto to facilitate payments. To facilitate payments, you can convert crypto to fiat currency in order to receive or make payments. The company has adopted a “hands-off approach” that keeps crypto out of the books.
It may be the easiest and most efficient way to get started with digital assets. This may not require any adjustments to the corporate functions, but it may be the most effective way to reach new clients and increase the volume of sales transactions. This limited use of crypto is often adopted by enterprises that rely on third-party vendors.
Allowing “Hands-on Payments”
A company that is willing to do more than enable crypto payments, and wants to expand crypto adoption within operations, the treasury function, or to go the “hands-on” route, may find significant benefits in addition to addressing technical issues.
Third-party vendors or custodians can be used to keep crypto assets safe and manage wallet management services. This allows for the valuation and tracking of crypto assets. Integrate crypto into company systems and manage private keys.
Use of Wallets
Digital wallets are used to store and manage crypto. A well-designed wallet structure is essential for a successful crypto Treasury function. Many entities have adopted multi-tiered structures where “hot wallets,” which are operational accounts, are used instead of “cold wallets,” which are used to store value. Tracking details of transactions can be a problem for entities that have high volumes.
Tracking involves keeping records of the date, time, and value of the crypto as well as the assigning of basis. Many entities choose to convert to stablecoins in order to lessen the volatility of traditional crypto assets’ prices.
This could mean that you convert Bitcoin to a stablecoin like USD Coin (USDC), Gemini Dollars (GUSD) or Paxos Standard Coins (PAX). The crypto can be used for traditional bank and Treasury transactions more easily once the swap has been completed.
This includes the ability to disburse or execute on-demand payments. It is possible with real-time transparency and without incurring delays.