This article originally appeared in Intelligent SME Tech.

Large institutions from Tesla to Blackrock have been investing in Bitcoin for years, but most SMEs still haven’t joined the revolution. That’s hardly surprising given that smaller businesses are focused on day-to-day operational concerns and surviving in a cut-throat market. What use is Bitcoin to them? Danny Barugh, Founder & Chief Executive Officer, LondonLink, explores the specific benefits of Bitcoin for SMEs and explains how forward-looking smaller businesses are harnessing Bitcoin to transform their operations, solve long-standing problems and open up new revenue streams. 

What possible use could a small business have for cryptocurrencies? SMEs might well think that digital assets like ‘crypto’ are only for big businesses and major financial institutions and that they’re irrelevant to the day-to-day needs of smaller firms.

To be clear, crypto isn’t for every SME. Yet thousands of smaller firms are embracing the digital asset revolution and for reasons that might surprise you. They’re not engaged in speculation, but instead harnessing the power of crypto to cut costs, reach new customers and open new markets – considerations that should chime with every ambitious smaller business.

What actually is crypto?

The first obstacle many SMEs run up against is the language barrier. The crypto lexicon is vast and often confusing, with terms like ‘digital asset’, ‘crypto’, ‘crypto asset’ and ‘cryptocurrency’ used interchangeably. It’s important, then, to establish some consistent terminology.

A digital asset is simply something that is created and stored digitally, is identifiable and discoverable and – crucially – has or provides value. A crypto asset on the other hand is 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 take the concept further: they are assets that function as virtual or digital currencies, where cryptography is employed to eliminate counterfeiting or double-spending. Some cryptocurrencies are ‘pegged’ to a government-issued currency like the dollar. Examples of such ‘stablecoins’ include Tether USD or Circle USD

The crypto opportunity for SMEs

To understand how crypto can help your business, the best place to start is by examining how use cases differ between SMEs and multinationals. For the latter, crypto is typically seen as ‘digital gold’; a hedge against inflation and just one asset among a large and diverse portfolio.

Smaller firms don’t have the luxury of stuffing money, digital or otherwise, under the metaphorical mattress. Instead, SMEs that adopt cryptocurrencies quickly realise they’re onto something immediately useful, as they begin harnessing crypto to remove cost and friction from international payments, open up new markets (including overseas) and signal their sophistication to customers.

For smaller firms, crypto’s most meaningful benefit is in the realm of transactions and operations, not investment. That’s why the most common form of crypto employed by small businesses is not volatile Bitcoin, but stablecoins. These are the perfect entry point to the world of crypto, because they feel familiar to ‘traditional’ money but operate far more efficiently.

Because stablecoins exist on a single ledger, banks or middlemen don’t take a cut. While there are usually some network fees to transact, 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. Meanwhile, there are no complex processes or long waits for SWIFT, domestic bank transfers or credit card payments to clear; transaction times are measured not in days, but in seconds.

Once you step through the door marked ‘crypto’, the world of traditional financial services you left behind – of punishingly-high fees, unfair exchange rates, significant frictions and slow transaction times – seems positively mediaeval.

It’s not difficult to see how crypto completely changes the very nature of business. Faster, cheaper transactions are the foundations on which companies can build entirely new business models, accepting payments from anywhere in the world and achieving the kind of global reach it takes multinationals years to build.

We don’t have space to list all the benefits and use cases of cryptocurrencies, but I’ll highlight one specific advantage. For smaller business owners, cash flow is a constant concern, and one of the biggest vulnerabilities is chargebacks. That risk simply doesn’t exist with crypto. Transactions are immutable; once a payment has been made, it can’t be reversed. That means SMEs – especially digital businesses, where the customer and the payment card aren’t present – can 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.

Crypto makes business faster, cheaper, safer and most importantly of all, more certain. In that regard, you don’t need to hold Bitcoin as ‘digital gold’ like multinationals do; for SMEs, they represent something useful beyond price.

What’s stopping you?

Though the market is maturing fast (just look at the recent spate of regulatory frameworks for digital assets), it can still be difficult for newcomers to know which companies they can trust. Probably the best heuristic here is tenure: is your potential crypto partner a veteran of the space or a newly-formed upstart that promises the world?

Certainly, crypto isn’t something you can incorporate overnight. There are up-front costs and overheads: 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. And to be completely honest, accepting crypto does put a target on your back. 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 anti-money laundering (AML) and know-your-customer (KYC) regulations.

Another consideration is 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?

Crypto’s demands deep research into the practicalities of adoption and integration and careful discrimination to find a trusted partner to help you overcome these obstacles. More than anything, though, it requires ambition and bravery; to use crypto as a launchpad to open new markets, deliver new services, and above all to be differentiated – both from your closest competitors and from the very richest companies in the world.

While the obstacles to adoption are a challenge for any business, the first firms that overcome the learning curve and integrate this technology into their business will be the first ones to reap the rewards.