Few of us have much in common with Elon Musk. If you own or run a business of any size, however, there’s at least one link: crypto. Though it might seem counterintuitive, crypto isn’t just for big business. The only real difference between a multinational and an SME is how they use it.
Increasingly, SMEs are beginning to integrate digital assets into their operations as they understand it does not only bring incremental, operational improvements, but can revolutionise their business, while opening up access to new markets and fresh customers.
You don’t have to be Tesla for crypto to change the way you run your business forever. You just need to understand how to harness it, Danny Barugh, Founder & Chief Executive Officer, at LondonLink explains more.
Defining Crypto
Crypto can be confusing to newcomers, so let’s clarify some of the terminology, starting with ‘digital asset’. This is a broad term that refers to any item created and stored digitally that holds value for the owner. The specific value depends on the context—for instance, in the entertainment industry, a digital asset might be a piece of copyrighted content like music or video.
On the other hand, a crypto asset is a digital representation of value or rights that is secured by cryptographic methods on a distributed ledger, commonly known as a blockchain.
Cryptocurrencies are a particular type of crypto asset that function as digital currencies. They rely on cryptography to prevent counterfeiting and ensure the security of transactions. Stablecoins, such as Tether USD or Circle USD, are examples of cryptocurrencies that are pegged to fiat currencies, providing reliably stable value.
Transforming SME operations
It’s important to mention stablecoins because it helps us understand how, and where, and why crypto is so transformational for SMEs – and how its use cases differ from large multinationals. Large corporations often view cryptocurrencies as long-term investments, whereas smaller firms are much more likely to find immediate, practical uses in their day-to-day operations.
Cryptocurrencies can help small businesses streamline transactions, reduce costs, especially in international payments, and open new markets, all while enhancing their reputation as forward-thinking enterprises.
For SMEs, the true value of cryptocurrency lies in its operational benefits rather than its investment potential. While the price volatility of assets like Bitcoin may be off-putting for small businesses, stablecoins offer a more stable entry point into the world of digital currency. These coins are tied to traditional fiat currencies, providing a familiar value structure but with the added efficiencies of blockchain technology.
By eliminating the need for intermediaries, stablecoins allow for cost-effective transactions that can be completed quickly, no matter where the customer is located. Traditional payment systems, with their high fees and long processing times, can feel antiquated once a business begins using cryptocurrencies.
As SMEs step into the crypto space, they may find that the traditional financial systems they once relied on—characterised by slow transaction times, high costs, and cumbersome processes—are no longer sufficient for their needs.
Addressing the Challenges of Crypto Adoption
While the benefits of cryptocurrency are clear, the path to adoption is not without challenges. The relative newness of digital assets means that many business owners face a steep learning curve. The early days of crypto were marked by a lack of regulation and the presence of unscrupulous actors, making it difficult for newcomers to navigate the landscape safely.
Despite the rapid maturation of the market and the introduction of regulatory frameworks, finding trustworthy partners in the crypto space can still be a daunting task. It’s essential for SMEs to vet potential service providers carefully, considering factors like the provider’s experience, reputation, and security practices.
Integrating cryptocurrencies into a business isn’t something that happens overnight. There are upfront costs and logistical challenges, such as upgrading point-of-sale systems for brick-and-mortar stores or ensuring that digital payments are seamlessly integrated with existing financial software. Additionally, dealing in crypto may draw extra scrutiny from regulators and financial institutions, potentially complicating relationships with banks and requiring strict adherence to anti-money laundering (AML) and know-your-customer (KYC) regulations.
Another key consideration is the custody of digital assets. Business owners must decide whether to manage their crypto holdings independently or rely on third-party custodians. This decision involves weighing the risks and benefits of each approach, including the security measures employed by custodians and the potential for issues like insolvency.
Although cryptocurrencies offer significant advantages over traditional currencies, adopting them requires careful planning, thorough research, and a willingness to embrace new technologies. For SMEs, this means finding the right partners and developing a solid strategy to overcome the challenges of integration.
The businesses that successfully navigate these challenges stand to gain a competitive edge, opening up new markets, offering innovative services, and distinguishing themselves from both their direct competitors and the large corporations that dominate their industries.
Seizing the Opportunity
Crypto’s potential to revolutionize business operations is undeniable, and those SMEs that take the plunge early will reap the rewards. While the obstacles are very real, they are not insurmountable. With ambition, careful planning, and a clear understanding of the risks and benefits, small businesses can leverage cryptocurrencies to transform their operations, expand their reach, and ultimately thrive in a rapidly changing financial landscape.