A growing number of businesses around the world are considering the use of cryptocurrencies and other digital assets for operational and transactional purposes.
According to a recent PYMNTS study, The Cryptocurrency Payments Opportunity: Driving Crypto Adoption And Use Around The Globe, 40% of companies in the Americas, Africa and the Middle East plan on using digital currencies for the above purposes within the next year, citing benefits such as shortened settlement times and reduced costs in transactions, especially with cross-border payments.
Read more: 40% of Companies Will Use Digital Assets to Make Purchases in the Next Year
Businesses are keenly aware of the potential crypto holds, but a number of obstacles remain in the way in terms of mass adoption for business-to-business (B2B) payments, said Liquid Group CEO Jeremy Tan in an interview with PYMNTS. Not least of which is the notorious volatility of many cryptocurrencies.
“The volatility is one of the things that excites people about why it’s so good, but if you’re looking at crypto in terms of business payments then volatility is not advantageous,” Tan said, adding that blockchain technology is fundamentally a very stable way to distribute value that is not going away.
“Eventually it will balance out, and crypto will reach a certain stage where, from a technology perspective, it is advantageous,” Tan predicted.
Businesses are equally aware that crypto lacks any kind of consistent framework and that regulation is murky at best. Tan said that while regulatory bodies in some countries have made an effort to introduce some sort of harmony to the idea of crypto for business payments, at this stage there are too many crypto companies that are still doing their own thing.
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“Everybody’s doing it their own way, trying to set the rules of the game to win market share,” he said. “Though at some point in time I think we will see more cooperation between the major players. And when they do, we’ll all be better off for it.”
If Not Now, When?
Tan said it’s difficult to come up with a reliable timeframe for when business payments will see more widespread adoption of cryptocurrencies. On the one hand, he said, we’re seeing the private sector innovate aggressively with unregulated, blockchain-based cryptos to try and gain market share. On the other hand, the banks — which Tan says are necessary players — have their own thinking and still view crypto as something that’s experimental, hence they’re a lot more cautious.
Further reading: US Will Regulate Crypto, JPMorgan’s Dimon Says
Regardless of the speed they move at, both the private sector and the banks have much to learn. Tan said the retail space has shown a lot of interest in crypto as a replacement for cash and coins. But to do so, would require a tremendous amount of processing power, he said. Then you have things such as cross-border and B2B transactions, which have their own considerations.
“There are different segments that need to be catered for and I don’t think there’s going to be one single regulatory framework or roadmap that covers everything,” Tan said. “It’s a learning process and there are a lot of very intelligent people trying to figure these things out.”
Pushed or Pulled to Transform
There is an ongoing question as to who will lead the transformation, and how legacy cross-border payments players will be incentivized to embrace change that will disrupt a profitable business they’ve overseen for 100 years.
Tan said he expects to see a lot of private sector innovation, with enterprises looking to take the initiative, and undoubtedly some will make waves. Ultimately though, he believes the banks will still have the biggest say in how it pans out.
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“There will be big movement, but it really depends on if the central banks are ready,” he said.
The chief worry for most banks remains compliance, Tan said. Fear of falling out of compliance explains why most banks have taken such a cautious approach when it comes to dealing with crypto startups and giving them access to the traditional financial services they need to do business.
“I wouldn’t say the banks are self-serving, but obviously they trust their own compliance processes more,” he said. “So you’ll see most banks probably won’t be that receptive to the idea of providing banking services for crypto companies, but they themselves will likely take baby steps toward it. Banks are well aware of the potential.”
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