CRYPTOCURRENCY AND ITS PLACE IN A POST-COVID RETAIL WORLD
As we emerge from a post-COVID world, leaders are taking the opportunity to rethink almost every aspect of society. It’s become clear that as we move forward, everything is subject to change. The way we work, interact, and transact with one another is in the midst of a revolution. As big businesses continue to consolidate wealth and market share, we are seeing small businesses being pushed out of traditional markets. That’s why being connected to the latest trends is more important than ever for any business owner.
Cryptocurrencies like Bitcoin have become a household name. With both eccentric fans and stark critics, it doesn’t matter how you perceive cryptocurrencies: They’re clearly here to stay. The push towards a cashless society is hardly a new concept. We have been moving in that direction for quite some time and COVID-19 has certainly accelerated that trend.
The Basics
Before going further, it’s important to establish what cryptocurrency is and how it compares to traditional fiat money. First and foremost, cryptocurrency is not fiat money. Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but by the government that issued it (Chen, James. Fiat Money). Cryptocurrency, on the other hand, is a digital or virtual currency that is secured by cryptography. A defining feature of cryptocurrencies is that they are not issued by any central authority, rendering them theoretically immune to government interference or manipulation (Frankenfield, Jake. Cryptocurrency).
Government interference is arguably the only thing holding our economy together right now. With not one, but two rounds of helicopter money, we have witnessed the federal reserve’s M1/M2 money stock go completely parabolic (“M2 Money Stock.” FRED). We’ve seen a 53% increase in M1 (coins and currency in circulation) in the last 12 months, alone. This happens in tandem with a frightening new trend of runaway money-printing that has led to the dollar reaching a fresh three-year low (FXStreet. “US Dollar Index Outlook.”). These aggressive forms of monetary policy have eroded public trust in the traditional fiat money system and have been the catalyst to both private and institutional adoption of cryptocurrencies.
With the influx of new investors, one strategy every struggling small business can deploy is accepting cryptocurrency as a form of payment. While the forms of payment your business accepts will depend on the nature of your business and the amount of risk you’re willing to take, cryptocurrencies have the potential to allow you to do business instantly with anyone in the world. Cryptocurrencies have all the features of the SWIFT system with lower transaction fees, faster processing times, and no risk of fraud or chargebacks.
Retail and Crypto
Companies that sell a product - digital or physical - would be wise to make use of cryptocurrencies, and many already have. One of the biggest hurdles facing digital retailers is fraud. According to the latest Nilson Report, the United States takes the cake with an astounding 33.99% of worldwide reported fraudulent credit card losses in 2018 (Report, The Nilson). Fraud hurts everyone. If you have ever had a chargeback, then you are aware of the fees that come with it. Business owners are likely to elect to accept cryptocurrency simply because it shields them from fraud and chargebacks; the cost-savings will be too good to ignore.
Accepting cryptocurrencies has never been easier. Many of the most popular payment processing companies have already integrated cryptocurrencies into their processing services. Companies such as Bitpay and Shopify can not only help you accept popular forms of cryptocurrencies but can also provide you the POS systems needed for your traditional brick-and-mortar store.
One of the first decisions you need to make before accepting cryptocurrency is whether you want to keep it or convert it to fiat. Most businesses will choose to convert cryptocurrency payments to the fiat of their choice. This process is managed by your payment processor and happens immediately. But for some, the idea of holding cryptocurrency as a speculative asset may be tempting.
Holding cryptocurrency does come with some challenges of its own. Deciding how to hold your own cryptocurrency can be both confusing and intimidating. This decision really comes down to how long you intend to hold and whether you want your funds available immediately or whether you would prefer them stored away offline for safekeeping. Another challenge to holding cryptocurrency is keeping proper transaction records. You will need your transaction records to help calculate any capital gains while filing your taxes. Fortunately, this process is very straight forward and modern tax software can help walk you through the steps.
Stay Ahead of The Competition and Protect Your Financial House
The moment is now to look to the future and embrace the latest trends. In such a volatile time, business owners need to position themselves ahead of the curve if they wish to truly succeed and exceed. As more and more of your customers turn to cryptocurrencies, now is the time to capitalize on the boom and expand your base by accepting this new and revolutionary form of payment.
Sources:
Report, The Nilson. “Payment Card Fraud Losses Reach $27.85 Billion.” PR Newswire: News Distribution, Targeting and Monitoring, 21 Nov. 2019, www.prnewswire.com/news-releases/payment-card-fraud-losses-reach-27-85-billion-300963232.html.
Chen, James. Fiat Money, Investopedia, 16 Sept. 2020, www.investopedia.com/terms/f/fiatmoney.asp.
Frankenfield, Jake. “Cryptocurrency,” Investopedia, Investopedia, 16 Sept. 2020, www.investopedia.com/terms/c/cryptocurrency.asp.
“M2 Money Stock.” FRED, 7 Jan. 2021, fred.stlouisfed.org/series/M2.
FXStreet. “US Dollar Index Outlook.” FXStreet, www.fxstreet.com/analysis/us-dollar-index-outlook-dollar-hits-new-multi-year-low-set-for-deeper-fall-in-early-2021-202101041532.