Understanding the future of cryptocurrency & its impacts on business

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The explosive impact of cryptocurrencies in recent years has changed the landscape of international business forever. From startups to multinational conglomerates, adopting cryptocurrency enables businesses to remain competitive on a global level.

Simply put, a cryptocurrency, or crypto, is a form of digital currency that can circulate without a monetary authority like a government or a bank. While cryptocurrency has been known for its extreme volatility, the trend has always been upwards over time, giving rise to the acceptance of cryptocurrency in all kinds of untapped markets such as healthcare and education. Without a doubt, cryptocurrency and its underlying blockchain technology has and will change the world as we know it. 

The cryptocurrency landscape in Hong Kong 

Hong Kong has been a major player in the cryptocurrency boom, being home to some of the largest crypto companies with trillions traded on its exchanges. A hotbed for blockchain and cryptocurrency businesses, many successful exchanges got their start in Hong Kong including Crypto.com, BitMEX, Bitfinex and numerous others. According to Chainalysis, Hong Kong racked up a crypto trading volume of US$74 billion between July 2021 and June 2022.

However, China’s latest ban on cryptocurrency trading has deemed cryptocurrency transactions illegal and its offenders liable for prosecution. These new regulations make the future of Hong Kong’s role as a crypto hub for the region uncertain. 

Regardless, any company thinking of venturing into the international cryptocurrency space should have a clear understanding of its risks and benefits before investing or adopting a cryptocurrency business model.

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Advantages of cryptocurrency for businesses

1. Eliminate the middleman 

By cutting out the need for a payment gateway, cryptocurrency eliminates the need for third-party intermediaries. Its decentralised nature on the blockchain makes it ideal for global operations — it enables companies to sidestep restrictive regulations and trade across borders easier, faster and more conveniently than ever. 

2. Reduce operating expenses

Another benefit of cutting out intermediaries is the lower operating fees associated with them. Leveraging cryptocurrency gives businesses the option of dealing with customers and suppliers directly, thus reducing the overall cost of transactions and overheads. This is advantageous for small businesses and entrepreneurs, as they are generally more sensitive to cost differences. By generating cost savings, it enables companies to allocate more resources towards business growth, thus helping them gain a competitive edge. 

3. Unlock new business opportunities

Blockchain and cryptocurrency opens new doors for businesses in all markets by removing the complexity of intermediaries from global supply chains. It has many applications in the logistics industry such as automating administrative and commercial processes. What’s more, adopting cryptocurrency as a viable payment method can create opportunities for new services and logistics business models. 

Risks of cryptocurrency

While many businesses might be keen to jump on the crypto bandwagon to reap its many advantages, it is equally crucial to consider the key risks before taking the leap. 

1. Volatility

The prices of major cryptocurrencies are known to fluctuate wildly. For instance, according to Anadolu Agency, the price of Bitcoin plunged 64% in 2022 after its highest point of US$$48,163 just a few months before.

2. Cybersecurity

While cryptocurrency offers enhanced anonymity and data privacy for both buyers and sellers, cybersecurity is a prominent and growing concern to watch out for. As with any digital currency, cryptocurrencies are vulnerable to cybersecurity breaches, with cryptocurrency crimes hitting a record high value in 2021. Hence, vigilance and next-generation security measures such as automated detection and response and threat intelligence are vital for the increasingly technology-driven future.