Cryptocurrency — the challenges, the opportunities… and what it really means for your business or accounting practice
Exploring Crypto's Impact: Insights from 'Xero Future Focus' interview with Electra Frost, on Navigating Digital Currencies in Accounting and Small Business Operations
WATCH THE XERO FUTURE-FOCUS YOUTUBE VIDEO HERE (4:15) Ask an expert: Electra Frost on crypto
The Digital Native Consumer and Crypto
The inclination of digital-native consumers is reshaping the expectations around business transactions. These consumers are anticipated to prefer transacting in cryptocurrencies, valuing speed, privacy, and convenience. Australian SMEs and and digital businesses will eventually need to adapt their payment systems to accommodate crypto transactions and should be monitoring innovative customer engagement trends in both the Australian and online business landscapes.
Key Terms and Concepts in Crypto
To understand the crypto space we need to become familiar with new terminology and concepts, just as we did when we first learned to surf the web. The terms become normalised over time. ElectraFi expects all currencies to become digital this decade, so we’ll need to grasp the difference between centralised and decentralised digital currencies, the applications of blockchain and Web3 to our business models, and comprehend the Internet of Value, which enables permissionless peer-to-peer business without centralised authorities. Cryptocurrencies operate on blockchain ledgers and to be used in this new digital environment fiat money must undergo an upgrade. Bitcoin, with its fixed supply and divisibility into satoshis, offers functionalities beyond a currency, including fast, cheap payments and smart contract capabilities on its network.
Starting with Crypto: A Practical Approach
For SMEs and accountants curious about crypto, a practical approach involves engaging with businesses that accept Bitcoin, understanding digital wallets, and experimenting with microtransactions over the Lightning network. This hands-on experience demystifies crypto transactions. Additionally, exploring crypto point of sales, NFT memberships, and popular crypto spending wallet apps can provide valuable insights. Local Bitcoin Meetups can be friendly places to meet people who are keen to show others the ropes, hands-on, and should emphasise best security practices and transacting with very small amounts to learn how to use wallets.
The Role of Accountants in the Crypto Economy
Accountants play a vital role in guiding SMEs through the complexities of the crypto economy. A technical understanding of blockchain technology, the distinctions between centralised money and decentralised crypto assets, experience with block explorers and different crypto wallets, and awareness of the storage and security best practices with custodial and non-custodial digital assets is essential. Accountants must remain adaptable, continuously learn, and stay open to change to thrive in this evolving landscape.
Crypto is the new money of the internet and isn’t going away, so accountants need to be recognised by their clients as competent advisers in this space. Accountants can also justify how their professional ethics are aligned with the blockchain, which is both an accounting and a governance technology.
As companies adopt Bitcoin, crypto and digital assets they will turn to their accountants for robust financial management solutions, adoption strategies and process-driven implementation.
Decentralisation: Opportunities and Challenges
The shift towards decentralised technologies and accounting firms backing public blockchains offers SMEs new opportunities to scale with increased control over their assets and data, reduced intermediary costs, and potential for new business models. However, this new frontier also presents challenges and risks. SMEs must approach crypto tools with caution, conduct thorough research, and assess their relevance to the industry and customer base. Due diligence is crucial, especially when dealing with start-ups in the crypto space, to mitigate counterparty risks.
The Future of Business in the Crypto Economy
The future of money is digital, with blockchain and cryptocurrencies playing a central role. SMEs and accountants need to position themselves to adapt and thrive in this rapidly evolving economy. Central Bank Digital Currencies (CBDCs), although centralised, could bridge the gap between traditional fiat currencies and cryptocurrencies including stablecoins, potentially leading to widespread use and interconnectedness of crypto technologies and platforms.
Building Trust and Transparency with Blockchain
Blockchain technology fosters trust and transparency in transactions, enabling secure and verifiable exchanges without intermediaries. This innovation has the potential to revolutionise business operations, reduce costs, and increase efficiency.
Additionally, blockchain can significantly streamline the reconciliation process for accountants, as trust-free cryptographic transactions are recorded in real-time on a widely shared and immutable ledger, ensuring all parties have access to consistent and accurate financial data.
Trends and Adaptability in the Crypto Space
The crypto space is fast-moving, with continuous technological advancements. A year in blockchain is said to be a dog year - 7 years. SMEs and accountants must remain adaptable, stay informed, and be prepared to pivot as the landscape evolves. Following influential, entrepreneurial and professional individuals in the Bitcoin and Lightning Network ecosystem, the blockchain industry and web3 start-up and education space, listening to podcasts, attending meetups, and experimenting with various wallets and apps are effective ways to stay updated.
Assessing Crypto Relevance for Small Businesses
Small businesses and e-commerce entrepreneurs can utilise Bitcoin crypto payments for efficient cross-border and peer-to-peer transactions with large populations of consumers that are leading crypto adoption, and gain improved liquidity. Web3 apps will provide decentralised options like secure identity verification and real-time transparent supply chain tracking. Integrating token gating to a business website can restrict access to services, similar to paywalls but without login/passwords, ensuring only verified or paying members benefit. Each business owner will research the global adoption trends relevant to their industry and develop their own strategies, ideally with the guidance of their crypto-savvy accountants and business advisers.
Conclusion
The integration of cryptocurrencies and blockchain technology into the business world offers SMEs and accountants a unique set of opportunities and challenges to mull over. A strategic approach, grounded in a deep understanding of the crypto space and a willingness to adapt, is crucial for navigating this new terrain successfully. By staying informed, engaging with the crypto community, and experimenting with crypto tools, SMEs and accountants can position themselves to thrive in a more decentralised and borderless digital age.
Thank you for reading.
Electrafi is exhibiting at Accounting Business Expo Sydney, Nov 22 & 23!
Join us at the big, in-person, event for the fast-changing world of digital transformation in accounting, business, finance and money. Visit our stand for more information on how we can assist with your company’s or clients’ business crypto adoption strategies and accounting software.
Register for free today. https://i.snoball.it/p/Bu1C/w
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