Phil Aldridge 

20th Feb 2022 

How can Crypto currency be relevant to an SME?  Surely this is a techy funky thing to do in your spare time.  Watching the heart wrenching ups and downs of BitCoin whilst you work out how on earth to navigate the process of setting up a digital wallet.  Many of us may need to turn to our kids to ask them what exactly crypto currency is and why is it better than fiat currency.  At least you can see the physical fiat currency. 

Many of you may already have a crypto wallet and may hold some crypto currencies in it like BitCoin or Ethereum.  You may enjoy the daily monitoring, or you may have some machines setup to mine the currencies. 

All of this is great from a personal perspective but how can Crypto Currencies be of use to my SME Company?  Well, this is where it gets interesting and if you bear with me, I will endeavor to explain where I think this is all going.  But first let’s handle the issues with traditional Fiat Currencies. 

Firstly, you should know that fiat currencies wherever you are a government issued currency that is not backed by any commodity such as gold etc.   Fiat money is a way for the central banks to maintain control over an economy by dictating how much of the currency is printed or in circulation.  Secondly is that this is also a way the Government can control inflation and hence interest rates.  As we have seen over the last few years central banks have printed billions of dollar/pounds etc.  Unlimited supplies of fiat currency can lead to economic bubbles which is often what the incumbent government want to demonstrate that their policies are working for the voting population.  Whilst this works in the short term the long-term ramifications are that the stock market goes into a bear market and the economy goes into recession neither of which are good for the people. 

With this basic understanding you can now start to think how your company transacts business with clients, vendors, suppliers etc.  Everything you do where money is concerned somehow goes through your bank.  Whether you are receiving money from overseas from a client or you are paying a supplier the transaction will often go through your bank.  A few things happen here. 

  1. Often from sending or receiving the money there are a few days where this money is in “limbo”.  It is neither in your bank account or the bank account of the client or supplier.  That is because it is in the banking system somewhere.  It may even be in a third bank related to neither of you because your bank does not have a direct relationship with the other bank.  I won’t go into what happens to this money during this process but needless to say it is rarely instantaneous transfer.  And along with this comes the bank charges.  Not only the charge from your bank for sending your money somewhere but also the charge at the recipient bank for receiving the money.  Then there is the charge by the unknown third bank for being the intermediary bank.  If you regularly transact in this way you can see your accounts to see how much money goes into bank charges. 
  2. Then there is the exchange rate.  When you receive pounds or peso to your Hong Kong dollar account the bank exchanges the money at the current rate of exchange.  This is a rate set by the bank and there is a spread between the buy and sell rates.  So, whatever you are doing the bank is making money on this transaction. 

This is where crypto currencies come in and where in terms of an SME the future of commerce may be going.  If you have a crypto wallet for your company and you have some crypto currencies in the wallet then you are in a great position to start to pay a vendor or receive money from a client via crypto currencies. 

All you need to do is to provide your Wallet ID to the Client and they can send you the crypto.  It is instantaneous and there are no charges.  Once the transaction has been processed by the system you will see the transaction reflect in your wallet.  The same applies in the reverse when you want to pay a vendor or supplier. 

The benefits of this are that: – 

  1. It is instantaneous. 
  2. There are no charges. 
  3. There are no exchange rates. 

I am in no way saying you will never need a bank account again but what you can do is use your company’s crypto wallet to transact with your international partners to reduce the cost of doing business. 

Of course, the more we go digital the more complex the security side of this becomes.  Crypto Wallets are very secure if you know what you are doing and at risk if you don’t.  No different to if you lose your briefcase and inside is a little black book with your bank account username and password in it on the same page with your banking token in the same suitcase.  It is all about knowing how to minimise the risk of being hacked by protecting your systems. 

This way or transacting is not going to become commonplace overnight but as crypto currencies become more prevalent in the market it will gradually become a major way to transfer and receive funds. 

The caveat I will say here is the fluctuations in crypto currencies.  The value of BitCoin can go up or down a big percentage every hour so I am not sure you would want to run your cash flow for the entire business on Crypto.  Some level of reservation to hold back from an all-in approach would be appropriate. 

Watch the business news to see how SME’s start to benefit from transacting in crypto.  I will try to keep you all up to date with developments.  As always if anyone wants to ask any question on this or anything else Tech related, please let me know.  I may not know the answer, but I will try my best to find out.