There has been a lot of buzz surrounding cryptocurrency for quite some time now, but businesses were reluctant to participate due to their worries regarding their volatility and complexity. However, there is a new topic in town – stablecoins.
While cryptocurrency’s price may fluctuate wildly and unexpectedly, stablecoins are built differently since they always retain a constant value based on tangible assets, such as US dollars. With more and more financial institutions and tech companies considering stablecoins’ implementation as payment, entrepreneurs around the world start to wonder, should you care?
What Are Stablecoins?
Stablecoins are digital assets that aim to have constant value. Unlike the cryptocurrency such as Bitcoin that fluctuates significantly, stablecoins ensure that there is stability because of their tie to a backing asset.
Their stability makes them more suitable for payments and business transactions than other cryptos.
Potential Benefits for Merchants
Speed of transaction processing can be another benefit commonly cited. While regular international transactions can take days before getting cleared, stablecoin transfers could get settled far more quickly.
Stablecoins may provide some benefits to firms that deal with international suppliers, overseas freelancers, global online marketplaces, or customers from various countries.
For example, some firms are looking into ways of using stablecoins in order to streamline international financial transactions.
Challenges Merchants Should Consider
Though stable coins are increasingly popular, they are not a good solution for all businesses.
The demand is still relatively low. Most customers would rather use credit/debit cards, e-wallets, or bank transfers than make payments in stable coins. There are also other issues such as accounting issues, regulations, taxation, and refund procedures that need to be considered by the merchants.
It is important for merchants to know how the transaction using stable coins works within their current payment structure.
Where Stablecoins May Make Sense
Payment by stablecoins might work best for businesses that engage in foreign transactions such as online markets, international trade, contractor payments abroad, and digital goods and services.
Local retail establishments, such as those in restaurants or salons, may not require customers to use stablecoin transactions.
Customer demands should determine the need for stablecoins over anything else.
Looking Ahead
Stablecoins are gaining ground in the world of payments, even though it may still take time before their adoption reaches the level where they are widely used for making payments. Nevertheless, it is true that many payment systems are already creating the necessary infrastructures so that people can use stablecoins to pay.
The only thing that merchants should do is educate themselves on how these payment instruments function because it is quite possible that one day stablecoins could become yet another convenient way of making payments.
