There has been a ton of noise around Bitcoin recently for two big reasons. The first is that the Bitcoin-USD forex climbed above $1,000 (currently just under $900, and the second is a heist that moved around $100 million worth of the currency, all able to be watched online through the public clearing houses. So if you are a business, what should you do with this and other currencies?
One of the main attractions to Bitcoin is that it is not regulated by a sovereign government. Some might say that it works in the purest form of capitalism, completely separating the buyer from the seller through an anonymous exchange. Well, somewhat anonymous. The contents and value of the wallet is public, but the owner of the keys that can use the Coin is not.
Since its release in 2009 it has seen wild swings in value against more widely accepted currencies. At times, you could buy whole Bitcoins for pennies. Issues with exchanges drive the value up and down much like governmental policy can impact a currency’s value in comparison to others. Many businesses are now starting to see the value of the virtual currency and have begun to accept it as a method of payment. In fact, at a recent event I attended there was a gentleman from McKinsey that told the audience (I’m paraphrasing), “if you are not paying attention to these forms of payment you will get left behind.”
The two major challenges businesses will face are setting up (and protecting) the technology to handle the method of payment and dealing with the wild fluctuations in value to their home currency. Think about it this way, depending on the current exchange rate—which is not nearly as stable as current paper forms of money—you might pay 0.005 BC for a coffee today, and then 0.10 BC in a week. Or think about paying your employees 1 BC this week due to the exchange, and then 20BC the next week.
What I expect will happen is businesses that regularly accept Bitcoin as a method of payment will have to “internationalize” their thinking on currencies. It will have to tie back to their main currency and they will need to be diligent in exchanging BC for actual cash (unless they are going to leverage it for speculation). Given the nature of BC, there probably won’t be tons of people looking to pay with this form of payment today, but it doesn’t mean that other virtual currencies won’t spring up, or that there won’t be some kind of risk to your business. There are benefits too; much lower fees than with your traditional credit cards.
For those of you out there, have you dabbled in anything Bitcoin related? Add some notes in the comments below!