Should Your Company Use Digital Currency?

digital-currency

Ethereum, Litecoin, Zcash, Bitcoin. These are just a few types of intangible, digital cryptocurrency that are taking the world by storm.

And many Australian businesses are taking notice.

We’re seeing a new trend where more and more organisations are now accepting and making payments with cryptocurrency. Whether consumers are downloading an app, booking a hotel or even buying pizza, they can now do it with digital currency.

If you’re looking for proof of its popularity, look no further than the value of a bitcoin. One bitcoin went from being worth a mere $66 AUD in April 2013 to being worth over $14,000 AUD in February 2018.

But does this make sense for your company? Is digital currency something you should seriously consider using?

Let’s discuss the pros and cons to find out.

Heightened Security

Perhaps the most appealing thing about digital currency is the fact that it’s virtually fraud-proof.

Online news publication Bitcoin Cryptocurrency explains that digital currency uses blockchain technology to keep sensitive information safe. This is primarily done through the use of cryptography – a system of secured communication, which is highly effective for preventing unwanted third-parties from intercepting information.

As they also point out, there has yet to be a single instance of identity theft with digital currency. Although credit and debit card information is continuously stolen and forged with relative ease, this simply isn’t the case with cryptocurrency.

BIZCATALYST360 adds that transactions can be verified by anyone at anytime, and no single person or organisation can manipulate them, which is a tremendous security feature.

For these reasons, the concept of digital currency can be very appealing to modern businesses, especially when you consider that the total cost of identity theft in Australia in 2016 was $2.2 billion AUD, and 6.4 percent of the population aged 15 years and older was affected.

With new data laws like the Notifiable Data Breaches (NDB) scheme and the General Data Protection Regulation (GDPR) carrying stiff penalties (NDB penalties can be up to $360,000 AUD for individuals and up to $1.8 million AUD for organisations), this is an added incentive for getting on board.

While using cryptocurrency can’t 100 percent guarantee that your customers won’t fall prey to identity theft, it’s certainly a step in the right direction.

Increased Profitability

Businesses are often required to pay transaction fees whenever customers use a credit or debit card. While the fee is only minor, it can really add up over time, especially during the course of a year.

When you look at this in the long run, these fees can take a chunk out of your company’s overall revenue. This can be especially problematic for smaller, fledgling businesses who don’t have a lot of extra capital to spare.

One thing that organisations love about digital currency is the fact that there are no processing fees because there are no third-parties involved. In turn, this can really maximise your profitability in the long run.

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Potential Brand Boost

Another thing to consider is that using cryptocurrency may allow you to appeal to a larger, more tech-savvy demographic.

The Steadfast Group mentions how Forsyth Real Estate in Sydney was the first Australian real estate agency to use cryptocurrency. By doing so, they gained a lot of attention not only in Australia but throughout the world.

All of a sudden, they received a huge volume of property inquiries and offers from all over the world and a significant brand boost. As a result, they were able to propel their brand reputation in a positive direction and they’re now viewed as one of the more innovative real estate agencies in Australia.

With interest in digital currency rising, you could argue that early adopters are viewed as being on the cutting-edge and forward thinking. So this can definitely be a competitive advantage and potentially a differentiate your organisation from others within your industry.

Now for the cons.

The Balance Can Be Wiped Out

One of the biggest drawbacks is that the funds can’t be recovered once they’re lost. Because digital currency is completely virtual and isn’t stored in a central repository like with traditional banking, your balance could potentially be wiped out with a computer crash if you don’t have a backup copy of the holdings.

While banks will typically cover you up to a point in the event that a cyber criminal steals funds, there simply isn’t a framework like this currently in place with cryptocurrency.

So once its lost, it’s gone forever. Needless to say, this could have some catastrophic consequences for your business.

Even when following best practices like backing up cryptocurrency on a drive that’s not connected to the Internet, there are no guarantees, and you lack the safety net that you would typically have with conventional currency.

Digital Currency Can Be Stolen

Although the threat of identity theft is diminished and there are significant security measures, it’s still possible for cyber thieves to steal digital currency.

Legal and blockchain reporter, Jeff John Roberts writes in Fortune that a Bitcoin wallet is accessed via both a public key and private key. While it’s nearly impossible for someone to figure out your private key, there are still ways of getting it.

Some scenarios include hacking your email or even finding it in the physical world.

There have even been incidents where cyber criminals impersonate legitimate companies and persuade individuals to send large amounts of cryptocurrency to a different wallet. After doing so, the funds are in possession of the hackers with no way of recovering it.

So the bottom line is that digital currency can be stolen. And you’re especially susceptible when you’re inexperienced with the ins and outs of safely managing your funds. Make a wrong move and your money could be swindled.

High Volatility

Unlike most other forms of currency that are relatively stable, cryptocurrency is subject to wild fluctuations. During the course of a single day in late 2017, the value of a bitcoin dropped by a staggering 20 percent. That’s about as volatile as it gets.

So what’s the reason for these dramatic fluctuations?

It’s largely due to the perceived value of digital currency. Unlike fiat currencies that are declared as legal tender by a government and therefore have an inherent level of stability, the value of cryptocurrency can ebb and flow significantly.

So in theory, a single incident of bad press could send the value plummeting overnight.

A good example is when authorities seized the proceeds from the sale of nearly 145,000 bitcoins which were valued at just over $48 million USD after shutting down the infamous online drug market called Silk Road back in 2013.

The fact that Bitcoin was linked to such nefarious activities lessened its value for a period. And with a collective sense of scepticism regarding cryptocurrency still prevalent, you can bet that major fluctuations will continue for the foreseeable future.

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For that reason, many organisations don’t feel comfortable with using digital currency at the moment. There are simply too many uncertainties.

What’s Right for Your Company?

News of cryptocurrency is everywhere these days. Major publications like Forbes, Bloomberg and Entrepreneur have all covered this topic in detail.

Bitcoin in particular has gained a lot of attention, and multiple documentaries have covered it in detail.

However, there’s still a certain amount of mystery and speculation surrounding digital currency and a collective global intrigue. So it only makes sense that Australian businesses would have a vested interest in it and be curious as to whether or not they should use it for accepting and making payments.

As you can see from the aforementioned points, there are some distinct pros and cons of digital currency. One of the main advantages is the fact that it greatly reduces the threat of identity theft, which is very appealing considering the growing number of data breaches and their costly nature.

Combine this with the absence of transaction fees and the potential for increased brand equity, and cryptocurrency can be very enticing for some organisations.

But on the flip side, there are some definite concerns mainly in the form of the risk of lost funds and high volatility which some businesses find unnerving.

Choosing whether or not it’s right for your company ultimately depends on three key factors:

  1. Your priorities – If preventing identity theft is a major goal, you should definitely entertain the idea of using digital currency. Otherwise, you may want to wait until it’s a bit more stable.
  2. Demographics – Are you catering to a tech-savvy audience that expects you up to be up on current trends like this? If so, using cryptocurrency is probably a good idea. If not, it may be unnecessary.
  3. Risk comfort level – There’s a certain level of risk involved here. While that’s likely to dwindle as digital currency becomes more mainstream in the future, perceived value can quickly raise or lower its actual value.

By examining these factors, the answer should become apparent.

Do you know of any other businesses that have used digital currency and what their experience was like? Please share your thoughts:

Image Credits

Featured image: MichaelWuensch / Pixabay

In-post image 1: David McBee / Pexels

In-post image 2: Make-someones-day / Pixabay

Muralee Krishnan

Muralee Krishnan is the National Assessments Manager at Stickman with specific expertise in PCI DSS and cyber security assessment and implementation. More articles by Muralee Krishnan

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