Insureon Blog

Is Bitcoin a Good Bet for Your Business?

28. June 2013 14:11

The Wall Street Journal reported this week that, around the country, more small businesses are starting to accept payments via Bitcoin, the burgeoning digital currency not backed by any central authority. Don’t get us wrong: the numbers are still very small. Sources note that, since 2011, about 8,000 small businesses have registered with an Atlanta-based Bitcoin payment processor, which allows them to accept Bitcoin payments from their customers.

Considering there are more than 20 million small and micro businesses in the U.S. alone, that number is just a drop in the bucket – but it’s still early days. The concept of Bitcoin was first presented to the world in 2008, and wasn’t even initially intended as a transactional currency.

Tech enthusiasts are excited about the potential the new currency has to revolutionize money as we know it, but the fate of the Bitcoin is still far from certain. Here’s a look at what Bitcoin and other digital currencies could mean for your business from a risk management perspective.

Small-Business Liability Risks Associated with Digital Currency

Let’s say you run a bakery. One weekend, your city’s hosting a marathon and you know business will be hopping – hungry runners will pile in for your carb-rich wares. But you also know that some of those runners and their fans won’t necessarily have cash on them – and you don’t accept credit card payments for transactions less than $5 because of the processing fees you have to pay.

If you accepted Bitcoin payments, though, your patrons could easily pay for their food using their smartphones, and you’d only have to pay a transaction fee of one percent. Plus, when you use Bitcoin, all transactions are final – no dealing with the credit card company over disputed charges.

Sounds pretty good, right?

Maybe. While that may be the dream scenario of how a Bitcoin-powered bakery would work, the reality is a little more complex. Consider that…

The bottom line here, as with most business or investment ventures, is that small-business owners should do their homework before hopping on board with Bitcoin or any other technological innovation. Make sure you fully understand the potential risks that working with a digital currency could bring to your company before getting carried away by the shininess of the potential rewards.

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