The term “cryptocurrency” refers to the encryption technique which is used to generate the currency and to verify the payments. Cryptocurrency supports “smart” self-executing contracts and used for a wide variety of applications. It uses decentralized technology and also allows anonymous payments. It does not have any physical representation like euros or dollars, and it has no intrinsic value. And the supply of cryptocurrency is not controlled or manipulated by any central bank, financial institution, or government.
In regular B2C or B2B transactions, the payments usually use cash, wire transfer, check, money order, or credit card payment. Governments regulate all of these transactions. It involves the use of one or more intermediaries and is potentially subject to fraud. Cryptocurrency occurred without banks or financial institutions and made using blockchain technology. It exchanges through direct, peer-to-peer transactions that are executed and verified using a distributed algorithm. It is faster than checks, ACH, and wire transfers and is much more secure. It requires fewer players and fees. Currently, more B2C accepting cryptocurrency, however, it has a different situation for B2B e-Commerce. The company such as Microsoft, Newegg, Dish Network, Intuit, Overstock.Com, Subway, Expedia and PayPal already accept cryptocurrency.
The ability to transmit payments globally with more advanced security and eliminate the manipulation by banks or governments makes it an exciting solution for payments. While the majority of the world’s population is unbanked, with just a smartphone, a computer, and an internet connection, people can perform the transaction on an e-commerce website. And it has a considerable benefit in B2B e-Commerce since it can eliminate the risk fraud by making the transactions irreversible without the receiver’s consent. However, there are risks associated with cryptocurrency.
Since Bitcoin amount limited to 21 million BTC, it makes the value of Bitcoin and other digital currencies highly volatile. Previously, all governments have the authority to control inflation, employment, and investments. However, it is not with the Bitcoin. It is not affected by any manipulation from the governments. And since the players can enter and leave the market, cryptocurrency value can up and down within seconds.
2. Government Regulation
Bitcoin, Ethereum, and other cryptocurrencies exist when governments allow their people to use it. Nowadays, no country recognizes cryptocurrency as a substitute for its official currency. In the U.S., the cryptocurrency has known as a money services business, and the government implements tax to the cryptocurrency. Canada recognizes it as a commodity and treats the transactions as barter. While Russia, Vietnam, Ecuador, and Bolivia are the countries that have banned cryptocurrency payment.
3. Competing Currencies
Bitcoin, Ethereum, and other digital currencies are competing against each other. The government of Iceland has its cryptocurrency. And another Canada startup, Kik, introducing another currency. While Amazon, in October 2017, it purchased amazonethereum.com, inamazoncryptocurrency.com, and amazoncryptocurrencies.com. It potentially makes other cryptocurrencies to be unavailable in the future.
Even though cryptocurrency has several risks, it has several benefits to become an alternative for B2B payments. Besides security, it has zero banks or governments interference. It could eliminate fraud because it does not involve intermediaries. And it is also faster than the other payment method such as checks, ACH, and wire transfers.