The Challenges of Accepting Crypto in a Volatile Market

Cryptocurrencies have transformed online transactions, offering a level of anonymity and privacy that all online users strive to have.

In a time where digital footprints are heavily scrutinized, the appeal of cryptocurrencies in sectors like e-commerce, online gaming, iGaming and fintech in general has grown significantly. 

The Major Industries Influenced by Crypto 

This shift is especially evident in the online casino industry, where crypto payments have become the turning point. Crypto-based gambling sites, including many anonymous casinos, have added benefits due to the decentralized nature of blockchain technology and cryptocurrencies, where players are not required to provide personal information to set up accounts to enjoy the casino’s services. This approach not only streamlines the user experience but also addresses concerns some may have about data privacy and security. 

E-commerce is another vital industry where crypto has been stirring water. The fact that people can sell and buy items without any real intermediaries – at least in the transaction part – is already changing the world. From buying tangible items that get shipped over to you to purchasing online services products using cryptocurrencies, we’re all witnessing an unprecedented level of freedom of choice. Of course, it’s not without fraud risks but we’ll cover that part below. 

Finally, gaming with crypto is a whole new genre that may include play-to-earn games (PTE) to win items you can then own (think NFTs) or sheer purchase of video games using Bitcoin & co. 

Understanding Market Volatility in Cryptocurrencies

Unlike traditional financial markets where stabilisation happens over time, cryptocurrencies such as Bitcoin and Ethereum can experience price fluctuations that can be unpredictable and dramatic at times. These fluctuations can increase by double-digit percentages in short time frames making these assets especially volatile. 

These price fluctuations are influenced by a variety of factors which include news events, technological developments, broader economic conditions, regulatory changes, market sentiment and investor speculation. Unlike fiat currencies, with cryptocurrencies, there is no influence from the central bank which means that with these extreme price movements, there is no backstop to stop the price fluctuations. 

Financial Implications for Business

Cryptocurrencies do offer many advantages for business such as global reach, reduced transaction fees, and faster payments. It does have some financial implications which can be significant. Businesses can expect potential losses and unpredictable revenue streams due to the volatility of the crypto markets. This means that if a business accepts crypto during a period of high volatility, the business is at risk for significant loss if the crypto value drops after transactions. 

Businesses that accept cryptocurrencies also need to navigate the complex landscape of tax and accounting compliance. Since most tax authorities classify cryptocurrencies as property, there are different sets of tax obligations than one would do with currency. 

It can also be extremely difficult to track crypto payments as each transaction needs to be recorded at the moment of the exchange to ensure that the value of the cryptocurrency is converted into fiat currency for tax reporting purposes. 

These types of transactions also involve multiple parties such as multiple wallets and can have varying amounts of transaction fees that need to be accounted for. This means that crypto’s fluctuating value makes it different to track the exact value of each payment over time. This can make it difficult for businesses to track losses and earnings accurately. To help with this issue, the use of accounting software can be used to report crypto transactions and continuously monitor to ensure that each transaction is accounted for. 

Risk of Fraud and Security Concerns

Businesses also have to address the significant fraud and security risks as the decentralized, pseudonymous nature of cryptocurrencies has unique vulnerabilities such as scams and hacking or fraudulent transactions that could take place. The security of crypto payments is an important concern for businesses. These digital assets operate on secure blockchain technology and have an economic ecosystem which includes wallets, exchanges and third-party payment processors. The common security issues include the following: 

• Hacks and data breaches 
• The risks of phishing attacks
• Weaknesses in third-party services
• Fraudulent transactions and chargebacks
• The irreversible nature of crypto transactions

Fraudulent transaction risks also include the following: stolen wallets, money laundering and fake payments. Crypto theft increases every year, with $2.2 billion stolen from crypto platforms in 2024. 

Businesses can implement the following prevention measures to minimize fraud risks. These effective strategies include: 

• Using multi-signature wallets.
• Transaction verification and monitoring.
• Education and training for employees.
• Partnering with trusted payment processes.
• Implementing Anti-Money Laundering (AML) and Know Your Customer (KYC) practices.
• Use of stablecoins for lower volatility.
• Secure storage solutions. 

Regulatory Uncertainty

Although cryptocurrencies are digital assets and operate outside of the central bank, the regulatory approach of crypto is different countries and regions. The regulations across countries differ greatly which means that businesses need to ensure they are compliant with the rules made in their jurisdiction. 

For example, in the United States, cryptocurrency is regulated by the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and the Internal Revenue Service (IRS). In a nutshell, in the U.S. there is a flexible approach towards crypto. 

The European Union is supportive of cryptocurrency and has regulations like the Markets in Crypto-Assets Regulation which stabilizes crypto regulation across member states. However, each European Union country implements its own rules regarding the use of cryptocurrencies. 

In China, the government has implemented a ban on cryptocurrency exchanges, and the use of digital currencies for payments and mining operations. 

Final thoughts 

Crypto has revolutionized online transactions over the last few years. Bitcoin, Ethereum, and other coin types allow for payments that are convenient, secure, and private. However, cryptocurrency is undeniably volatile. This volatility makes it essential for investors to adopt effective strategies to stay adaptive to the unpredictable market. By doing so, investors can harness the benefits of crypto while staying on top of its challenges. 

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