Is Cryptocurrency the Future of Business Payments?

In the last few years, there have been tons of changes in the world of finance. As many businesses are exploring the power of blockchain technology, cryptocurrencies are becoming more popular for different transactions. These digital currencies are now used for paying for services and products, investing, settling the salaries of employees, and lots more.

As a result of the growth in the adoption of cryptocurrencies, people are asking various questions about them. Is cryptocurrency the future of business payments? Can we rely on digital currencies for future transactions? Let’s answer these questions below.

Who has adopted the use of cryptocurrency?

Various surveys have shown that many individuals and companies accept cryptocurrencies. The likes of PayPal, Whole Foods, United Airlines, Home Depot, and Starbucks already accept payments through cryptocurrencies. Many more businesses have adopted the use of digital currencies for different transactions.

According to research by Deloitte, more than 70% of all interviewed retailers want to start accepting stable coins or digital currency in the coming months. Once this happens, more individuals will be open to learning how to use digital coins for numerous transactions.

Why are businesses adopting the use of cryptocurrencies?

To have a better perspective of what the future holds for cryptocurrency in the business world, it’s paramount to look at the benefits of the currency. Here are the reasons why businesses are using cryptocurrencies for business payments:

Increased security

Security challenges have plagued several businesses. They’ve lost lots of money and customers to criminal activities online and offline. Fortunately, these companies can now use cryptocurrency to mitigate those challenges.

Blockchain technology encrypts and keeps payments and other transactions in a secure, decentralized ledger. As a result of this, it’s more difficult for criminals to have access to payment information. This doesn’t only help businesses, but it also offers peace of mind to customers.

Quicker cross-border transactions

Since transactions involving digital currencies don’t need third-party involvement, they tend to be faster than traditional transactions. Besides, the transactions are often seamless as the parties involved don’t have to deal with complicated and expensive processes.

Payments to Africa, Asia, Latin, or Oceania can be difficult and slow with traditional methods. However, through a reliable crypto payment gateway, you can complete transactions in a few minutes, regardless of the other party’s location. In the past, this could take several hours, days or even weeks. This will open more business opportunities for numerous people in different parts of the world.

Reduced transaction fees

Compared to banks, credit cards, and other conventional payment means, the transaction fees of cryptocurrencies are significantly lower. This is because of the decentralization associated with blockchain technology. With the aid of this technology, businesses don’t have to complete transactions through third parties. Hence, they don’t have to pay third-party fees.

Due to the reduced transaction fees, small businesses don’t have to deal with recurring charges. This also lowers the cost of their services and products, thus, attracting more clients.

Involvement of new audiences

The last few years have brought in a significant increase in the adoption of cryptocurrencies among varying demographic audiences. In other words, numerous new users from different demographic groups are now using digital currencies.

Similarly, foreign clients now have access to small businesses. This is because those clients can pay for services and products instantly without dealing with payment challenges.

What does the future hold for cryptocurrency for business payments?

Undoubtedly, the future looks bright for cryptocurrency as a business payment gateway. It’s believed that more businesses will utilize Bitcoin and other digital coins for completing numerous transactions. Furthermore, the astounding security, transparency and speed provided by blockchain technology will make a big difference in the business world.

However, this doesn’t undermine the challenges that crypto adoption is and will deal with. Many cryptocurrencies have lost their value, thus, making many people skeptical about their uses. While there could be some struggles with its full adoption, its benefits will continue to draw more people to it.

Blockchain technology

Despite being relatively new, Blockchain technology is revolutionizing the payment industry. Using a digital ledger, the tech allows for near-instantaneous payments. It also reduces the costs of transacting money. In addition, it eliminates the need for unreliable third-party intermediaries. This can be particularly beneficial in a world where the need for cross-border transactions is increasing.

The use of smart contracts is another application that is proving to be a boon to the industry. Smart contracts are digital code that automatically triggers functions when certain conditions are met. They can signal the delivery of goods, determine the conditions of a transaction, or automate a process.

The use of Smart Contracts to make a payment has already been tested in the banking and venture funding sectors. The technology’s use in this sector is likely to be the most significant. The benefits of the technology will spread beyond the finance and banking sector.

As the economy undergoes a radical transformation, several players will be able to exploit the power of Blockchain. These include banks, stock exchanges, and other companies seeking to capitalize on the technology’s potential.

The benefits of blockchain technology are becoming widely accepted. There is a growing need for speed in settling transactions. This is especially true in emerging markets where there is a strong need for cross-border trading.

A recent report by Juniper Research estimates that global e-commerce payment transactions will exceed $7.5 trillion by 2026. This figure is expected to increase as the Internet of Things grows. It is predicted that the number of cross-border transactions will continue to grow.

While it is not possible to say with certainty that all transactions will be made through the Blockchain, it is possible to expect a reduction in cost, high reliability, and a better user experience. In the end, the benefits of innovation must be balanced with the risks associated with it.

Stablecoins

Increasingly, stablecoins are being identified as a potential solution to the high price volatility of unbacked crypto-assets. They offer safer, cheaper payments and address financial crime prevention. They also help to connect the unbanked and underserved to the financial system.

Regulatory regimes for stablecoins must clarify consumer protection, tax rules and market integrity. They must also ensure that they are consistent across all activities and sectors. These regulations should include capital requirements, public disclosure and liquidity requirements.

True stablecoins should hold 100% of their reserves in high quality liquid assets. They should also be optimized for efficiently moving value, not for earning interest. They should not engage in maturity transformation, which can create destabilising runs. They should also be isolated from other assets and held in a reference asset. This will give the issuer a comfortable level of security.

There are a number of private-sector and public-sector options for stablecoins. While e-money institutions have the advantage of offering deposit coins, the public sector may be better able to connect with businesses directly.

The EU is leading international efforts to put in place a new stablecoin regulatory framework. These efforts take into account the limitations of the EU e-money directive.

The regulatory framework will also address issues related to concentration of economic power and the risks of disrupting the payment system. It will also include regulation of exposures in the traditional financial sector. In addition, it will provide consumer protection and clarity on AML/CFT.

Ultimately, the success of stablecoins will depend on whether and how governments regulate them. Comprehensive regulation would address risks from disruptions to the payment system, destabilizing runs, and the concentration of economic power. It will also address issues relating to consumer protection and innovation.

The Office of the Comptroller of the Currency recently issued guidance on US banks using stablecoins as a payment system on public blockchains. This paves the way for the accelerated adoption of stablecoins in business operations. The government must ensure it implements the right regulation before it becomes a risk. The regulatory environment for stablecoins must be robust and level across countries.

Regulations need to be enacted

Several state governments have proposed legislation concerning cryptocurrencies. They hope to leverage crypto investment to stimulate their local economies. These efforts are unlikely to succeed without the support of a robust federal regulatory regime. If Congress wants to avoid being left behind by other states, it should pass legislation giving the SEC authority to regulate crypto-assets.

A federally regulated financial system must protect investors, consumers, and legitimate financial services enterprises. This should not come at the expense of reasonable efforts to prevent money laundering and terrorist financing. The current regulation gap in crypto is a major contributor to fraud and investor protection problems. It is also a significant threat to the financial system as a whole.

There are several areas where Congress can improve the existing regulatory regime. It should direct relevant agencies to consider different ways to meet core principles, such as investor protection, tax compliance, and preventing market manipulation. It should also ensure that the SEC has sufficient resources to regulate the crypto market properly.

Congressional action would address several areas, including defining crypto as a digital asset, disclosing real estate transactions, and licensing virtual currency businesses. It could also address money transmission statutes. It could provide consumer protection and establish a task force on virtual currency. It could allow the use of virtual currency as payment within government agencies.

In addition, the SEC could develop new rules relating to virtual currency investment. The agency should also enact investor protections to protect against fraud and market manipulation. It should enact regulations to curb the operational risks of exchanges and securities and derivatives intermediaries. It should also increase its resources and avoid special treatment for new products.

The OCC recently issued a letter affirming banks can provide custody services for cryptocurrencies. It also noted that they could provide related services, such as trade execution, reporting, and valuation. It is unclear how this will work in practice.

Creating a better regulatory regime will limit illicit crypto-payments and protect consumers, investors, and financial institutions from cyber attacks. A broader product definition will also be more effective in regulating the technology as it evolves.

In a nutshell, digital currencies could be the future of business payments. Therefore, small and large businesses should explore the benefits of these currencies.