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Impact of Digital Currencies on your Business in 2022

by Amarachukwu
Impact of Digital Currencies on your Business 

In the previous post, we discussed how to generate passive income in 2022, read here

Technology has brought a whole wave of innovative and simple ways to do things that have been known to be tedious in previous times, yet many are still yet to tap into the many goodnesses of technology. 

Cryptocurrency, just like every aspect of technology, created a lot of doubts in the minds of earth citizens when Bitcoin first launched. A study, according to Forbes shows that an estimated 85% of Americans are yet to warm up to the idea of cryptocurrency as only an estimated 15% own any form of a digital asset like Bitcoin. 

This may be a result of ignorance or wanting to be pessimistic about innovations as people have ever reacted to anything new in technology. 

What this vast majority of people do not know however is how easy technology has made things to be, particularly digital assets in business which is the focal point of this discourse. 

What is a Digital Currency?

Before learning what digital currency is, it is important to understand what digital currency isn’t. 

‘Digital currency’ does not invariably mean ‘Cryptocurrency.’ 

Cryptocurrency exists on a decentralized ledger which is known as a blockchain. It has value and can be exchanged for goods and services just like fiat. 

Fiat means money that is made a legal tender by a government and fiat can also be digitized. For example, the USDT (US Dollar Tether) is a digitized fiat that can also be used in the exchange of goods and services just like the dollar currency. 

The US Dollar Tether is categorized as a fiat-collateralized stablecoin. This means the value of the US Dollar Tether equals the value of the Dollar in circulation being used under the Central Bank. 

Cryptocurrency is a form of digital currency, but not every digital currency is cryptocurrency as in the case of fiat.  What makes cryptocurrency very different from fiat is the decentralization of digital currency, which makes it independent of any government regulation. This means it can operate independently of a central bank. 

A digital currency on the other hand is a money-like asset that is stored and exchanged in an electronic. A cryptocurrency is just a form of digital currency. So to summarize:

  • Digital currencies can be centralized or decentralized while cryptocurrencies are mostly decentralized. 
  • All cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies.  
  • Some digital currencies are not transparent and most operations are kept confidential while every operation on cryptocurrency is kept transparent. 
  • Some digital currencies unlike cryptocurrencies are centrally regulated by the government. 

Now that the meaning of digital currency has been established, how does it benefit people as business owners? 

How Digital Currencies help your Business

The contribution of digital currencies to business would be stated here in a broad sense, cryptocurrencies are inclusive. Below are some fascinating ways digital currencies can benefit any business, whether it is in its early phases or as a big thriving company: 

  1. Speedy transactions: Activities that were once difficult and complex have been replaced with seamless transactions since the materialization of digital currencies. It used to be extremely demanding to transact with clients outside a country as there were many hindrances in form of finding a medium to send or receive money to the conversion of what was received to local currency. With the emergence of digital currencies, transactions have become fast and secure, creating a safe space for people in world apart countries to do business swiftly. And when businesses are able to set themselves up globally and not stay restricted to their home countries, chances of greater revenue is eminent. 
  2. Digital currencies are more secure: Digital currencies create a safe and secure medium of transaction because payments can be verified and confirmed almost immediately.  Organizing receipts and keeping track of transactions has become very convenient for business owners as transactions made on digital platforms are secure and cannot be fraudulently replicated.  
  3. Accountability: Transactions of cryptocurrency are recorded on a public list known as a blockchain. This makes accountability easy with the possibility of seeing every transaction ever made from an account. 
  4. Prevents chargebacks: Once transactions have been registered on a blockchain, they cannot be retracted. This saves a business from unnecessary chargebacks from clients who might want to be fraudulent by charging back whilst still holding on to what has been purchased. The lack of flexibility in blockchains is beneficial to businesses that can now only refund customers with valid reasons. 
  5. Chances of higher profits: Many digital currencies like cryptocurrencies are not affected by inflation, unlike fiat. This gives businesses earning possibilities if the money paid to them in the form of cryptocurrency appreciates in value. The volatility of cryptocurrency might also be a disadvantage which will be discussed shortly. 
  6. Low transaction fees – The peer-to-peer possibilities of digital currency make charges on transactions very minimal.  

Disadvantages of digital currencies for businesses 

  1. Digital currency, particularly cryptocurrency, is awfully volatile. So much that the value of what was paid to a business might have plummeted when the business wants to make withdrawals of their earnings. This also makes bookkeeping a little confusing as total earnings keep fluctuating as values appreciate or depreciate. 
  2. Too much responsibility on business owners: Digital assets are extremely secure because they were made to be secure. Private keys are not to be shared with just anyone or anyone for that matter for obvious reasons. Distrust or just logically understandable safety measures might discourage a business owner from sharing details of digital assets with employees which leave the business owner with the sole responsibility of handling everything finance. If for any reason, funds in a business owner’s wallet get stolen as some wallets are susceptible to hacking, there are no authorities or customer service to help. 
  3. Unavailability in some locations: Cryptocurrency has not been accepted by many countries in the world. This makes it impossible to be able to send or receive cryptocurrency with clients in such regions.
  4. The set-up process is a bit complicated: People who are not really tech-savvy or are considered as “The next billion users” find it extremely difficult to get a hang of setting up their digital accounts or wallets. This may discourage some business owners to give up on the idea of digital transactions altogether. This is in fact one of the reasons why a lot of people have adamantly refused to go digital with their businesses. 

Some of these disadvantages are reasons why the vast majority are still skeptical of the idea of digital currencies. Will the involvement of the Central Bank, which they have more confidence in, change their minds? 

Impact of Digital Currencies on your Business 

Issuance of Digital Currency by the Central Bank

There is a popular opinion that digital currency might just be the end of cash, which might end up rendering the Central Bank useless. 

Many have opined that for the Central Bank to stay relevant after digital currencies take over within the nearest future, it is pertinent for the Central Bank to start issuing digital assets. What benefits could the involvement of the central bank in digital currency yield?

  • What I think the involvement of the Central Bank can result in is, more trust and support from the public to digital currencies, even though digital currency skeptics might not have a choice when businesses they want to shop from beginning to accept nothing but digital currency as a form of payment from clients in the future.    
  • Innovation is encouraged as more startups would be in an unending competition to create the next revolutionary medium of digital transaction which would of course involve added benefits like lower fees, secure transactions, faster transactions et cetera. This innovative competition is already prominent with the rapid increase of tech companies in the Fintech space.
  • Issuing its own digital currency would prevent a central bank from losing its essence and market share to cryptocurrency. With the Central Bank joining the innovative world of digital currency, they literally get to “keep their jobs” because word on the street says cryptocurrency would be the end of central banks. 

I am almost certain that if you ask any crypto enthusiast right now how they feel about the government involving themselves in the crypto space, everyone would cringe at the thought of it. In fact, it is popular opinion that what makes crypto special is the autonomy crypto investors enjoy. What are some issues that may arise if this ever happens? 

  • Exposure of personal data to the government: Well, when has anything about anyone ever been private from the government? It is not new knowledge that the government has information on every citizen but even more information would be collected in the guise of regulating and protecting the digital assets of citizens. More than assurance, it would raise privacy concerns. 
  • A digital currency backed by the government and central bank will not grant the same anonymity and autonomy we currently enjoy with cryptocurrency. There might be implications of privacy infringement with the spending habits of citizens being monitored in a bid to control cash flow. 

How can government involvement affect businesses? 

Impact of Digital Currencies on your Business 

  • If central banks become involved with digital currency and reserve all regulation rights, countries that are not on friendly terms might not be able to send or receive from each other. This might pose a huge threat to the global positioning of businesses that aim to transact with cross-border clients and scale their businesses to a global level. 
  • Battle of the monies: with so many digital currencies in existence trading against the fiat, it appears to be like the fiat digital currency that will be created may lose its value if other forms of currency, in this case, cryptocurrency is used and valued more than the fiat. 

Final Thoughts

Now that you know what huge benefits are in stock for businesses if they choose to go digital with their transactions and the downsides of using digital currencies as a business, the onus is on you to decide what is best for your business while you consider these factors: 

  • Location of business 
  • Industry of business
  • Location of the majority of your target audience and what the laws concerning digital currencies and cryptocurrencies in these locations are. 

Do your due diligence as a business owner before making any decisions and hopefully, for your business, the benefits outweigh the downsides. 

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