Even if you’re still feeling a bit baffled by cryptocurrency, it’s impossible to ignore. And it throws up lots of questions for businesses. Should we accept it as payment? Should we invest in it? What are the tax implications? What other hurdles might trip
us up?

All good questions that any switched-on leader should be asking.

With crypto continuing in its current downward spiral, it’s hard to find many positive things to say about it right now. Nevertheless, as new generations grow up using it, we might have to jump on board – or miss out.

Trust is everything

Crypto is plunging dramatically downwards but these are tricky times generally. Even conventional – known as fiat – currency is looking unsteady, so how do we know which horse to back?

Years ago, traditional, government-issued currency was based on a physical commodity. Coins were minted from gold or silver, and paper money came with a guarantee that it could be exchanged for a certain amount of those metals, or something equally tangible.

Today’s fiat currencies, though, don’t have a basis in how much gold a nation has stashed in the vaults. Today’s money is worth something simply because the government maintains
its value.

“Today, fiat currencies are based on trust, in a similar way to crypto,” explains Northern Tonic MD Rob Ormiston. “The difference is that fiat has a basis in the trading fortunes of a country. People view sterling or the dollar or the euro as solid because they’re related to economies that are solid. Countries with a less solid economy see their fiat currencies fluctuate a
lot more.”

Risky business?

With no national economy – or even a long-standing financial institution – as back-up, can we really trust crypto? While major events can suddenly affect the stability of national – and even global – currencies, it could be argued that crypto is even more open to outside influence. Investors such as Elon Musk can affect the fortunes of Bitcoin in a way that, say, Richard Branson, might struggle to influence sterling.

So does this inherent instability – and the current crash – signal the end of crypto? Not quite. Some experts are predicting an inevitable bounce-back and say now’s the time to invest, with rates looking very cheap.

And that’s without even considering the problems with the
status quo.

Moving away from high street banks

Whatever the future holds, the fact that cryptocurrencies cut out the banks makes them very appealing to many.

“The direction is definitely away from high street banks,” explains Rob. “And it’s no surprise. Their models are fundamentally broken. They’re inefficient, overweight in terms of their overheads, and ripe for change. But although the world is transferring from an old model, the new one isn’t ready yet.”

One of the many issues is that paranoia about regulation has made the banks so anxious, their security measures are often tied up in nonsensical bureaucracy.

Rob explains: “There’s a very real risk that if someone has never had a passport or a driving licence, they can’t open a bank account. On the other hand, a criminal, such as a money launderer, understands the system and would have those documents. They would then be able to open a bank account when a law-abiding citizen potentially couldn’t. That makes a nonsense of the whole process.”

“Crypto provides a very real alternative to these potentially out-dated approaches.”

The blockchain gang

Regardless of the future and fortunes of crypto, there’s one particular feature that’s likely to make huge waves in other sectors: blockchain – the way cryptocurrencies’ records are kept.

Essentially a shared database, stored multiple times, on multiple computers, a blockchain guarantees data is safe. The way this iron-clad security creates trust could be applied to any sensitive data, not just currency.

“The blockchain element is one to watch,” says Rob. “It’s an interesting way to store financial records and leaves a clear trail if something goes wrong. It’s going to have big ramifications for the legal profession and anyone keeping sensitive records.”

If your business deals in data that needs to be secure, keeping an eye on blockchain would be a wise move. For more plain-speaking advice on tech for your business, check out our guide to what you need in your digital toolbox.

The challenger banks

Another option to get away from the big, slow-moving high street banks, is to use a challenger bank, such as Monzo or Starling. They work well and definitely avoid the big, flabby overheads of the big four banks. But when something goes wrong, generally there’s no popping into your local branch, where you’ve got a relationship with the clerk – although it’s worth pointing out that Metro is a challenger bank that’s developing a branch network. And if you want anything more complex from your account, such as invoice discounting, you’ve often got no alternative but to go to a traditional bank.

The online-first banks are forcing the old guard to change, but a big legacy takes a long time
to modernise.

Protecting your business from the roller coaster

Disruptive and democratic, crypto is certainly bound up with lots of rebellious idealism. People like the idea of decentralisation – and they’re frustrated by the mainstream banks.

And if you choose to accept it as payment, you’ll still, at this stage, attract attention. But what about the risk and instability? Of course, you can always convert crypto immediately to sterling (or another stable currency) but you could lose money through the conversion.

Rob suggests enjoying the novelty – up to a point. 

“If you choose to accept crypto, the best hedge is to spend in crypto. If it’s all going up and down together, you don’t have that risk of losing out on the conversion.”

Getting on board safely

Our general advice is that adopting cryptocurrency is sensible, but make sure you protect yourself against what can be a volatile currency. 

Rob’s final word of advice for SMEs?

“Consider accepting Bitcoin but don’t hold big volumes of it. Keeping a £500 (equivalent) balance that you use, and an account which allows customers to pay it in, is an interesting – and safer – way of dipping a toe in the crypto waters.”

If you’d like to discover more about how to make the move into cryptocurrency, without risking your business, get in touch for a chat.

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