Updated: Aug 19, 2022
A growing number of businesses worldwide are using cryptocurrency in their transactions, but what does this mean for the future of finance?
While the adoption of cryptocurrencies in B2B transactions is still in its infancy, the popularity of these digital alternatives to traditional money is growing among businesses. That said, the future of cryptocurrency remains uncertain, particularly about the evolving regulatory environment around it. As with any significant technological disruption, finance leaders would do well to keep informed and stay one step ahead of the hype.
What is cryptocurrency?
Cryptocurrency, or crypto, is a type of digital currency that exists on decentralized blockchain networks. Blockchains have distributed ledgers spread across disparate computing networks, thus making counterfeits or double-spending practically impossible.
While there are now hundreds of cryptocurrencies in circulation, Bitcoin (₿) remains by far the best known. It’s also the oldest cryptocurrency, having first appeared in 2009. Other popular cryptocurrencies include Ethereum, XRP, and Tether.
What makes cryptocurrency distinct from traditional currencies is the fact it’s not
maintained by any centralized authority, such as a national bank or corporation. In other words, it is a peer-to-peer system valued entirely based on supply and demand.
What does this mean for B2B payments?
Many multinational companies have already adopted cryptocurrency to facilitate cheaper and faster international payments, mainly due to the fact that it is not tied to any particular economy. For example, a US-based company wants to send funds to a company in the EU. First, they will convert fiat currency into cryptocurrency, which will then be held in a secure digital wallet. The US company then sends the wallet address to the recipient, who will then convert it into the fiat currency of their choice.
The 3 main benefits of cryptocurrency?
There are 3 main benefits of using cryptocurrency for international transactions.
#1 Lower fees
Fees for cryptocurrency exchange services typically cost less than one percent, whereas conventional credit processing fees can reach as much as five percent. Nevertheless, exchange rates can still vary considerably.