Cryptocurrency fuels new business opportunities
Big-name brands are starting to take note: PayPal and Whole Foods are just a few of the many organizations that accept cryptocurrency payments. In fact, nearly 16,000 venues around the world accept cryptocurrency payments, according to Coinmap.org. And the cryptocurrency market is expected to grow from $1.6 billion in 2021 to $2.2 billion by 2026, according to a report published by MarketsandMarkets.
At the same time, cryptocurrency presents an opportunity for companies to create new and innovative offerings around these digital assets. There are many examples, from mobile apps that make it easy for consumers to start using cryptocurrency to platforms that automate the purchase of bitcoins for investors just starting out.
But while staking a claim in today’s cryptocurrency market can drive customer engagement and competitive wins, the right set of tools and talent are required to hurdle obstacles that include consumer fears, technology headaches, and compliance concerns.
Crypto markets demand
Consumer demands are not the only factor driving enterprise cryptocurrency adoptions. Blockchain is the distributed ledger that underpins digital assets like bitcoin, ethereum and solana. This decentralized approach allows data to be stored in an individual’s crypto wallet, rather than in a central depository where data breaches could occur.
A blockchain general ledger is used for verifying and recording every transaction. This makes cryptocurrency transactions more secure than debit and credit cards, and also speeds up verification by eliminating the need to use time-consuming third parties. “We have seen a growing demand from merchants–from grocery chains to fast-food chains – that want to accept cryptocurrency because it truly is a win for consumers and merchants,” Sara Xi, chief products officer at Prime Trust, a fintech infrastructure provider that integrates API crypto integration.
Cryptocurrencies have another advantage: lower transaction fees. “Crypto should be used just like any other fiat payment system. Xi says that consumers can pay for goods with crypto, and not convert to fiat currency. “Credit card processing fees will be irrelevant for merchants or consumers.”
In addition to cost savings, cryptocurrency is enabling businesses to access new target demographics. For example, take The Pavilions Hotels & Resorts group in Hong Kong. The Pavilions is the first international hotel chain to accept digital currency payments. Customers can book rooms in many of the hotel chain’s global destinations, based on the currency and location they are situated in at the time of booking, using bitcoin, ethereum, or 40 other digital currencies.
According to Scot Toon (managing director of The Pavilions Hotels & Resorts’ Asia region), accepting cryptocurrency payments has allowed The Pavilions Hotel Group a lucrative cross-market, such as luxury travellers who trade in cryptocurrency.
Joseph Lupo agrees. Lupo is a general manger at CoinBits, which assists investors and businesses to secure build, manage, protect, and grow their private bitcoin portfolios. Lupo says, “We saw a need for higher net-worth individuals as well as businesses that want to invest in this asset class.” “They need an on ramp and someone they trust, since bitcoin doesn’t have a headquarters or team. So we created Coinbits Reserve to help high net-worth individuals and businesses invest in bitcoin. We manage their investments but also focus on education and what this new form of digital, finite money can do for them.”
While companies ponder potential business models and use cases for cryptocurrency, there are factors to consider before entering the market. The volatility and wild price fluctuations of cryptocurrency are still a problem. Security and compliance concerns can slow down adoption in more highly regulated sectors like finance. Xi of Prime Trust says that banks are trying to figure out how they can access crypto compliantly. “The problem is that they don’t have the necessary compliance expertise and crypto domain knowledge to understand the regulations in this space. Making it worse is that there haven’t been clear regulations on what’s compliant.”
Also pressing is the need for IT infrastructure to evolve to integrate cryptocurrencies. The Pavilions Hotel, for example, relies on a legacy booking engine to allow guests to book a hotel room online. Toon claims that the system is unable to accept cryptocurrency payments. Toon states that the company tried to find an alternative but was unable to “find a suitable vendor that would allow us to place cryptocurrency through the booking engine . As a result, guests who are crypto-paying must book directly through The Pavilions’ reservations center. After a call, an agent sends an email with a link to guests that they can click on or scan for cryptocurrency payments. Toon states that this extra step can slow down the process. People want to book immediately. They don’t want anyone to contact them or email them. They want to make the reservation .”
As cryptocurrencies gain acceptance, Xi predicts that businesses will seek out an IT infrastructure that is open to integration with a wide range of solutions and features. She notes that it can be costly and overwhelming to manage multiple vendor integrations
Another challenge for organizations looking to enter the cryptocurrency market is a shortage of qualified talent, which is crucial in developing innovative products. Xi says, “We all know that crypto engineering and product talent is extremely difficult to find these days.” This can lead to two outcomes, says Xi: either “huge upfront costs to staff in-house teams” or, alternatively, “a really long wait to go to market and an opportunity missed” to gain a competitive advantage.
This content was produced by Insights, the custom content arm of MIT Technology Review. It was not written by the editorial staff of MIT Technology Review.
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.