Article written by Terence Zimwara
The number of merchants accepting crypto-currencies like Bitcoin as a means of payments remains very low. Apparently merchants are only willing to accept cryptos as payment when there are sufficient numbers of those who wish to pay this way. When that happens however, businesses are likely to even display prices in crypto-currency but it is still a long way before we get to that stage.
Meanwhile many potential clients will only use cryptos increasingly as a payment method when there are enough merchants accepting them as means of payment. No one wants to be stuck with a currency that is not widely accepted. In other words, Bitcoin still has to pass the acceptability test even after being around for 10 years.
The question then arises; what must come first; merchant adoption or general public adoption?
Essentially, the idea is making crypto trade or the conversion to and from fiat money seamless, with little to no involvement of intermediaries. When that is achieved, merchants will be open to accepting crypto-currencies because of the obvious savings they stand to gain.
Onus on crypto issuers
In the same way a businessman would reject a currency from a country he barely knows that is the same way he will reject crypto-currencies. He does not want to be trapped with a currency that he believes no one in his line of business is willing to accept as a medium of exchange.
An understanding of this means crypto-currencies issuers will have to redouble their efforts at finding a solution that allows for this seamless conversion between fiat and crypto-currency.
The merchant does not even need to know the complex process of Bitcoin mining or to even download the Blockchain software in order to start accepting cryptos. Their only interest is serving their customers—including those buying with cryptos—well and getting rewarded with a purchase.
The onus is on crypto entrepreneurs to proffer solutions that bridge this gap and already there are products on the market that are doing exactly that. Devices like the PundiX Point of Sale machine, which allows for the seamless conversion from Bitcoin to USD, is one potential solution merchants are looking for, if only they are aware of this.
PundiX POS allows the swift and secure switch from Bitcoin to USD locally. There is no need to involve crypto exchanges domiciled in foreign countries; everything is done locally over the counter by simply swiping a debit card or through a QR code.
So going back to the earlier question, yes it is quite possible for merchants to adopt crypto-currencies first without having to worry about not being able to use these. In fact, a merchant need not understand the complexities of Bitcoin, the POS device does that. The merchant only needs to know how to operate the POS device! When that happens, potential users will be encouraged to accept crypto-currencies thus setting the stage for greater adoption.
Meanwhile, a merchant will not be worried about tax evasion concerns because the conversion device can always convert revenues into legal tender when necessary. Apparently this may be another key concern that is slowing crypto adoption by merchants. Businesses are wary of possible tax avoidance and evasion allegations or risks should they decide to accept Bitcoin or any crypto-currency for that matter, so a solution like the Pundix POS potentially undercuts such concerns. In countries that do not recognize crypto-currencies as money, government tax agencies will be satisfied as long as they know taxes are settled in legal tender even if crypto-currencies were used in the transactions.
Dealing with volatility
As is often the case with many other potential users, the price volatility of cryptos is another key challenge for merchants as well. No one wants to trade in a currency that is unstable. Merchants want to be certain of the value they get before a deal is concluded and that the value stays the same after. So when Bitcoin starts the day at USD11 500 but ends it at USD10 900, this is not ideal for a business that has to make payments to suppliers at the end of that day.
And unless the merchandise is priced solely in crypto-currency—which is even more complicated—there is little rationale for accepting cryptos as payment in the first place. At least that would be the thinking of businesses that refuse to accept cryptos.
Well there is a solution to that too! Today there is a growing list of crypto-currencies or alt coins that address those exact concerns and these are called stablecoin. Bitcoin remains king of crypto-currencies but stablecoins—which are essentially hybrids—have a place in this fight for adoption. As the name suggests, stablecoins are created in such a way that they do not fluctuate widely over a given period because the track the value of an underlying asset. The underlying asset can be a commodity or a basket of fiat currencies. True to form, stablecoins like the USD Tether have demonstrated this ability to remain stable; the Tether has maintained a value which is more or less equal to US$1 throughout its lifetime.
Using such a crypto-currency eliminates the volatility risk thus making wider acceptance a real possibility. The upcoming Libra token looks to be a potential game changer but it has to pass the present test, politicians and regulators are a staging a sustained resistance.
Of course there are more advantages to those accepting crypto-currency as payment but ignorance as well as hostility by regulators are stopping potential users from realizing these advantages. Nevertheless, as more people get disillusioned with the fiat currency system, it is imperative for those working to promote the use of alternative forms of money to regularly repeat this message.
- Crypto payments are prompt and the transactions fees are significantly lower because there are fewer middlemen or intermediaries involved, if any.
- Crypto-currencies are usually not subject to exchange control regulations or a particular monetary policy as is the case with fiat money. A business organization can make cross border payments or receive payments from abroad without worrying about the foreign exchange control rules and regulations. Usually such rules compel recipients of payments from abroad to surrender a portion or the entire proceeds at an uneconomic exchange rate. For businesses operating in economically weak countries, an adoption of cryptos means this so-called foreign exchange risk is eliminated.
- Cryptos are not affected by local inflation trends hence they are a good store of value.
An understanding such advantages means more merchants will start accepting cryptos as payment because they know at the end of the day, they will be able to convert all revenues—using innovative devices—into a currency that governments recognize. There is zero tax evasion allegation risk, there is zero exchange rate risk and more importantly, there is zero entrapment risk!
Terence Zimwara is a crypto-currency enthusiast, author, analyst and an advocate for alternative money based in Zimbabwe. The limitations and failure of fiat currencies in his country, Zimbabwe and in many poor African countries has made the case for crypto-currencies and Terence writes articles to highlight this to the rest of the world. He has contributed articles in local and global media well as via his blog temra-temra.blogspot. You can contact him via email email@example.com, Whatsapp 263 771 799 901, @tem2ra , Linkedin and Facebook.