It’s no secret that cryptocurrency and its underlying blockchain technology continue to make headlines. With companies such as Tesla announcing its acceptance of bitcoin (it has since backtracked on this due to environmental concerns), Coca-Cola launching over 2,000 crypto accepting vending machines, and sports stars like Aaron Rodgers requesting to be paid in cryptocurrency–the phenomenon seems to be here to stay.
However, these payment developments are predominantly in the business-to-consumer (B2C) space. The crypto boom for B2C companies hasn’t genuinely translated to the business-to-business (B2B) environment yet. Although, it seems change could possibly be on the horizon. Businesses are starting to embrace blockchain technology in a multitude of ways. Consider these developments: In October 2021, Ubisoft announced its plans to incorporate play-to-earn principles into its business model through cryptocurrency. Soon after, in November 2021, Deloitte announced its strategic alliance with the Avalanche blockchain to improve state and local governments’ recovery from natural disasters.
Companies embracing blockchain technology isn’t exactly widespread cryptocurrency payment adoption, but are the tides changing? What is stopping B2Bs from accepting crypto? And when could B2Bs receiving cryptocurrency become commonplace? We’ll start by exploring further where things currently stand.
The current state of the B2B payment environment
As of late 2021, B2B companies are resistant to accepting cryptocurrency as a form of payment on the majority. According to a recent B2B payments research, only 32% of B2B company representatives show considerable interest in accepting cryptocurrency payments. That same study revealed 59% of B2B Companies are not open to cryptocurrency as a form of payment at all. Conversely, only 2% of those studied currently accept cryptocurrency. Within the survey data, there is an interesting group of companies that are open to accepting crypto at the right time (22%), not accepting crypto but intend to (7%), and those actively exploring the possibility of crypto payment acceptance (10%).
Additionally, the payments study revealed that cryptocurrency would need to offer convenience and currency value appreciation to really drive industry adoption. With those desired outcomes in mind, what are some headwinds preventing cryptocurrency from guaranteeing convenience and value appreciation?
Headwinds for B2B crypto acceptance
A catalog of factors is causing B2B companies to shy away from cryptocurrency payment acceptance. Here are a few prominent factors preventing cryptocurrency from currently being accepted:
1. Volatility
Cryptocurrency markets can be staggeringly volatile. According to an Investopedia.com article, “In a single day in May 2021, the price of Bitcoin plunged by about 30% before recovering to be down about 12%.” Cryptocurrency’s volatility can be partially attributed to the preceding items on this list.
2. Utility
B2B companies need to feel that they can use cryptocurrencies as money to spend or convert into cash without the aforementioned significant volatility risk. They’ll need to see their upstream vendors and service providers accepting crypto as a form of payment for this to happen. There’s a chicken and egg problem here that’s unlikely to resolve itself without robust adoption among consumers.
3. Security
The cryptocurrency has been rife with high-profile security breaches. B2B Companies are willing to wait on the sidelines until these security issues are resolved, and they can confidently rely on the reality of accepting cryptocurrency as payment.
4. Fear of regulation
The cryptocurrency industry is widely unregulated, and regulation is inevitable. China recently banned cryptocurrency mining, and India is expected to outlaw cryptocurrency almost completely. These regulatory winds are causing B2B companies in the U.S. to take a cautious, late-mover approach to cryptocurrency payment acceptance.
When might B2Bs accept cryptocurrency payment?
As I mentioned before, it’s not all bad news for cryptocurrency. In addition to companies embracing blockchain technology, web3, which empowers technology such as non-fungible tokens (NFTs) through cryptocurrency, is exploding in popularity. So when might B2B companies start to embrace cryptocurrency payment?
B2B companies will continue to be highly cautious and lag behind the B2C companies. B2Bs will be hesitant to introduce volatile assets onto their balance sheets which is a primary precursor to accepting cryptocurrency as payment. However, the actual kicker is that B2Bs will need to see cryptocurrencies used as currencies. Blockchain developments aside, cryptos are not being used as a traditional currency–specifically as a medium of exchange. Cryptocurrencies are essentially being used as a speculative store of value or token.
Eventual B2B cryptocurrency payment acceptance isn’t guaranteed
As the B2C world continues to adopt cryptocurrency and blockchain technologies, the B2B companies might one day follow suit. However, this development seems far off. For this to happen, cryptocurrency values will need to stabilize, avoid the onslaught of potential regulation, improve security flaws, and showcase increased utility as an actual currency. While there’s no guarantee crypto will ever cross these gaps, it could potentially be a lasting, influential component of the financial industry and business at large if crypto can address these concerns. B2B companies will only be willing to adopt it as payment when crypto makes sense from a convenience, cost, and profitability standpoint, which could be some time into the future. Regardless, it’ll be a fascinating development to monitor over the next few years.