6 Risks of Cryptocurrency Every Business Should Know

  • Home
  • Finance
  • 6 Risks of Cryptocurrency Every Business Should Know

From retail to hospitality, the use of cryptocurrency is rampant in many industries globally. It can deliver plenty of benefits, such as offering a convenient method of payment and facilitating instant transactions. Nonetheless, businesses must be aware of its risks, including those that we’ll talk about in this article.

  • Government Regulations

Both regulation and non-regulation can pose significant cryptocurrency risks. While regulation will help in legitimization, it has tax and income implications. On the other hand, non-regulation can cause many businesses to have second thoughts about adoption because being in an unregulated market means there is no investor protection. If you want to know more about the risks arising from the regulatory environment, consider taking a short course in cryptocurrency and disruption.

  • Fluctuating Market Value

The volatility in market value is one of the most important crypto risks to watch out for. It is more unstable than fiat currency. It can rise or fall significantly in a flash. The huge swings in values can affect the financial performance of businesses. This volatility can drive investors away as they search for more stable markets to ensure more favorable returns on their investments. Making it easy to lose out on significant amounts of investment because of these fluctuations!

  • Human Errors

Errors are inevitable. In cryptocurrency, human error can translate into significant losses. From losing hardware to being locked out of your wallet, errors such as these can result in disastrous situations. Since cryptocurrency transactions are irreversible, something as simple as inputting the wrong value can cause huge losses.

  • Limited Acceptance

While cryptocurrencies are growing in terms of global popularity, there’s a long way to go for its mass adoption. This can be a risk for businesses. Because of limited acceptance and lack of alternatives, it is also more volatile compared to physical currency. It is a young technology, which explains why many businesses and customers are still having second thoughts about its adoption.

  • Technology Reliance 

Technology is a good thing, however, cryptocurrency being 100% reliant on technology does open it up to various risks. From mining to using cryptocurrency, everything is done online. The lack of physical collateral to back up crypto investments may make some businesses doubtful. It also increases the vulnerability to fraud and cyberattacks.

  • Hacking

As a digital currency, hacking is another crypto risk making businesses uncertain about its adoption. Care, custody, and control can be challenging.  The lack of third-party oversight makes hacking a more serious problem. Crypto exchanges and wallets are susceptible to breaches. While there are technologies in place, such as encryption, they are not always enough to prevent hackers from stealing cryptocurrency from businesses.

From government regulations to hacking, this article discussed some of the risks associated with cryptocurrency that might leave businesses hesitant about its adoption. These issues may also make investors apprehensive about entering the new and complicated world of crypto.

Leave a Comment