Not Just for Multinationals - Why Crypto Could Give Your Startup Wings

This article originally appeared in Startups Magazine. Writer Danny Barugh.

Startup founders have a to-do list as long as their arm, and investing in crypto almost certainly isn’t on it. After all, crypto is just for speculators, major institutions and multinational enterprises, right?

If that were true, no one’s told the thousands of small and medium-sized businesses, just like yours, that are adopting digital assets, including cryptocurrencies. These firms aren’t gambling on crypto’s future price, but instead harnessing its unique properties to transform their operations and open up new markets.

The reality is, crypto isn’t a flight of fancy: it can give your startup wings.

Jargon-busting

There’s no denying that ‘crypto’ has a steep learning curve, so let’s start by clarifying some commonly confused terminology.

• Digital asset: anything that is created and stored digitally, is identifiable and discoverable, and – crucially – has or provides value.
• Crypto asset: a digital representation of value or contractual rights that is cryptographically secured through the use of distributed ledger technology (DLT), otherwise known as a blockchain.
• Cryptocurrencies: a subset of crypto assets that function as virtual or digital currencies.

Is crypto for me?

It’s a good question, and the answer depends on your business - and your ambitions. The only way of knowing is to understand the benefits cryptocurrencies can bring.

Low-cost transactions: For startups, one of the most immediately obvious benefits of crypto is through removing the cost and friction from international payments. That’s why, for SMEs, the most common form of crypto is stablecoins: digital currencies based, like Bitcoin, on a blockchain, but with their value pegged to a fiat currency. Because stablecoins exist on a single ledger, banks or middlemen don’t take a cut. While there are usually some network fees to transact in crypto, the cost is typically trivial, and it’s the same whether your customer is in your store or on the other side of the world.

New markets, new models: Faster, cheaper transactions are the basis for entirely new business models, enabling startups to begin accepting payments from anywhere in the world and achieving the kind of global reach it takes multinationals years to build. Bypass your bank’s expensive, cumbersome international payment systems, and start trading directly with the whole world!

Lower risk: Yes, you read that right! With crypto, transactions are immutable; once a payment has been made, it can’t be reversed. That means startups – especially digital businesses, where the customer and the payment card aren’t present – can eliminate the risk of chargebacks, accept much larger payments, and can ship the goods as soon as the payment comes through the door. The equivalent chargeback protection for card processing can be more than 5% for some businesses.

The adoption challenge

None of this is to say that adopting crypto is plain sailing. There’s a steep learning curve involved, and it can be difficult for startups to navigate this landscape and find a partner they can trust.

So, let’s be honest and upfront about the challenges:

• Costs: You have to spend money to make (and save) money, and it’s no different with crypto. There are startup costs involved: for physical merchants, this includes new point-of-sale terminals (although the solution could be as simple as an Android device). There are back-office considerations, too, such as ensuring crypto payments and wallets are fully integrated with your existing accounting systems.
• Acceptance: You may not consider yourself a “crypto business” just because you use it to transact - but others may not agree. Many high street banks can be reluctant to do business with what they deem “crypto companies”, while regulators may expect you to comply with strict AML (Anti-Money Laundering) and KYC (Know Your Customer) rules.
• Custody: Whom do you trust to safeguard your coins? Is it better to self-custody or rely on a third party? And if it’s the latter, how can you be sure that they not only deploy the strongest possible security, but that they’re not at risk of insolvency (and aren’t engaged in nefarious activities, like lending out your coins without your knowledge)?

While the obstacles to adoption are very real, so are the benefits crypto can bring. The potential opportunity from being the first in your market to master that learning curve and integrate crypto into your business, meanwhile, is beyond measure.