The last six odd months have seen the cryptocurrency market witness an unparalleled amount of financial volatility, so much so that the total capitalization of this fast-maturing space has dropped from $3 trillion to approximately $1 trillion. This comes after the industry hit all-time highs across the board last November, with Bitcoin (BTC) reaching a price point of $69,000.

Despite the previously stated volatility, a recent report shows that small to medium-sized enterprises (SMEs) across nine separate countries, Brazil, Canada, Germany, Hong Kong, Ireland, Russia, Singapore, United Arab Emirates and the United States, are extremely open to the idea of accepting cryptocurrency payments — especially Bitcoin.

Within the study — which surveyed a total of 2,250 market entities — 24% of the respondents said that they plan on accepting Bitcoin alongside other digital assets in the near term, while a whopping 59% of participants revealed that they plan on transitioning exclusively to the use of digital payments by the start of 2025.

From the outside looking in, crypto payments offer a range of benefits. For example, the issue of chargebacks or compliance with payment card industry standards are completely mitigated when it comes to digital assets. Not only that, acceptance of Bitcoin and other digital currencies can help attract additional business from crypto enthusiasts as well as potentially multiply one’s profits (since many of these currencies stand to become more valuable over time).

Does accepting crypto really make sense for SMEs?

According to Igneus Terrenus, policy advocate for cryptocurrency exchange Bybit, Bitcoin makes absolute sense as a day-to-day medium of exchange for SMEs. He told Cointelegraph that as a payment network, Bitcoin (when used in conjunction with the Lightning Network) is unequivocally superior to the seven-plus-decade-old system that underlies credit cards, adding:

“Bitcoin on Lightning is disintermediated, has finality built into it, faster, more secure and is many magnitudes cheaper in transaction cost than credit card’s ~3% fee. The payment does not necessarily need to be settled in BTC since the Bitcoin network can take dollars, convert them to BTC and transfer it across the network and convert it back to dollars upon arrival.”

When asked about the volatility side of things, Terrenus explained that if viewed with a shorter time frame, BTC is no doubt a risk-on volatile asset. However, if looked at with a more panoramic view or denominated in relation to inflationary currencies like the Turkish lira and the Argentine peso — that have exhibited respective increases of 73.5% and 58% in their May consumer price index levels — it may very well still be better at preserving purchasing power than most fiats during times of intense volatility/bear markets.

Ben Caselin, head of research and strategy at cryptocurrency trading platform AAX, agrees with this assessment, telling Cointelegraph that accepting Bitcoin as well as other more established cryptocurrencies is still the right course of action for most SMEs since there is now a plethora of mechanisms for them to tap into large liquidity pools and new demographics without being over-exposed to excessive market volatility, adding:

“Current market conditions may be bearish but the overall adoption of Bitcoin and key crypto infrastructure including the development of the Metaverse as well as the integration with traditional financial markets continue to advance. For any businesses looking to plug into the crypto ecosystem and economy, this is a good time to pursue such endeavours in anticipation of the next phase of the adoption curve.”

The answer may be quite simple

Lior Yaffe, co-founder and director for blockchain software firm Jelurida, noted that business owners who want to accept Bitcoin but are afraid of a serious price decline should simply “convert their BTC to fiat as soon as they receive it.” In Yaffe’s view, a business’s decision to accept Bitcoin should not be based on short-term price fluctuations, adding:

“Even with all the volatility, there are compelling reasons for SMEs to accept Bitcoin, such as the ability to control funds directly without relying on the good will of a third party. Businesses selling goods and services over the internet and having problems using the existing credit card system, businesses based in countries where the local currency is extreme, businesses who cannot work with their local banking system can all benefit from the use of BTC.”

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That said, he did concede that there is no shortage of problems for entities accepting crypto payment these days since tax payments and business expenses are required to be paid in local fiat currencies. As a result, accounting becomes more difficult and expensive while elevated cybersecurity risks also enter the fray.

Kene Ezeji-Okoye, co-founder and president of Millicent, pointed out the exact same thing adding that most crypto payment gateways automatically convert crypto to fiat before settling with merchants, thus making prevailing market conditions of little to no consequence. He told Cointelegraph:

“Goods and services are generally priced in fiat, and when accepting crypto, merchants simply end up with the fiat value of the crypto at the exact time of purchase less the gateway’s fees. This can be a better deal than the fees charged by card networks or PayPal, so it makes sense for some merchants to add this option.”

Regarding the problems associated with receiving direct crypto payments, Ezeji-Okoye believes that the most prominent issue affecting digital asset payments is that of exchange rate volatility. He highlighted that this holds true for SMEs as it does for nation-states like El Salvador, a country that has seen the value of its Bitcoin holdings drop by half against the United States dollar. “In most cases, merchants will need to pay for their cost of goods in fiat currency, so indiscriminate exposure to a volatile asset is an extremely risky practice,” he added.

A look at the downsides

Vanina Ivanova, chief marketing officer for noncustodial decentralized finance wallet solution Ambire, told Cointelegraph that accepting highly volatile assets like Bitcoin as payment can be rather harmful to a small or medium business since such establishments usually hold tiny cash buffers and are, therefore, vulnerable to market instability and fluctuations. Allowing customers to pay in a volatile currency can add to this risk and leave a business exposed to higher risk, in her view. She said:

“There are multiple issues that must be solved before crypto is accepted as a mainstream payment option by SMEs - the most important one being, in my opinion, the lack of infrastructure. Integrating a crypto payment gateway is not a straightforward process, and there are limited vendors that offer it as a service.”

In this regard, she noted that Shopify’s recent coming together with prominent cryptocurrency exchange Crypto.com was a big step in the right direction, however, owing to the fact that most jurisdictions around the world still do not recognize crypto as legal tender, bank account maintenance for SMEs can be a real nightmare.

Other obstacles in the way of adoption include scalability since even though there might be sufficient layer-2 solutions that can make accepting crypto payments fast enough, on a larger scale the problem continues to remain quite apparent. Ivanova highlighted:

“Unpredictable transaction costs are also a factor that needs to be considered. While traditional systems charge SMEs significant fees for payments processing, these fees do not vary and can be factored in in pricing. Given that gas fees are absorbed by the customer in the case of crypto, businesses may lose sales because of this.”

Ezeji-Okoye believes that if a business owner is simply accepting BTC in order to “buy the dip,” they’re better off setting up calculated trades on an exchange rather than accepting exposure from random volumes of purchases at random price levels with money they need to buy supplies. 

Additionally, setting up a new payment gateway is also not a feasible option for merchants because, given the existing macro environment, it will be hard for many SMEs to justify their initial investment. He added:

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“Accepting crypto payments directly without using an intermediary like a gateway is possible, but runs the risk of falling afoul of regulators, even in countries where crypto payments aren’t prohibited. One of the reasons payment providers charge so much is because they take care of Know Your Customer and Anti-Money Laundering checks.”

Is there a middle ground to be found?

While Bitcoin is no doubt a great option for SMEs, an interim solution for businesses — till all the creases get ironed out — would be to accept stablecoins. This type of asset allows business owners to reap all of the benefits put forth by blockchain technology while offering none of the risks of day-to-day volatility.

In fact, folks like Ivanova believe stablecoins can help speed up cryptocurrency adoption, which in turn can alleviate various technological and legal hurdles for crypto. To this point, it is worth noting that the government of the United Kingdom recently announced that it plans to introduce stablecoins into its regulated payment system, which comes as good news for SMEs since it provides them with a new low-fee, regulatory compliant and stable method of accepting crypto payments.

Therefore, with the global economy quickly gravitating toward the use of digital currencies for daily transactions, it will be interesting to see how the future of this space plays out, especially as more and more businesses become more adept at handling cryptocurrencies.