We take on enough risk when engaging in financial matters that we need implicit trust in the institutions that secure our finances. This is just as true for individuals as it is for small business owners. As small business owners do operate on tight margins with a limited safety net, they need to be able to believe and implicitly trust in the security of their banks and the currency that they trade in.
It is this matter of trust that has had so many of us sceptical and nervous in considering virtual currencies like bitcoin. Every dollar counts when it comes to running a small business, so taking a risk on a virtual currency that lacks the protections of the Australian dollar may be too great.
Tuesday’s announcement that Coinbase has commenced trading will likely have significant impact upon the way bitcoin security is perceived. Coinbase believe that their exchange offers greater legitimacy for the virtual currency. In establishing their bitcoin exchange, Coinbase is backed by US$106 million from the New York Stock Exchange and various other financial institutions. Furthermore, this new exchange is approved for use in 24 US states, including New York and California.
Coinbase Chief Executive Brian Armstrong has indicated that he eventually plans to extend the service internationally, telling The Wall Street Journal that “Our goal is to become the world’s largest exchange”.
— Coinbase (@coinbase) January 26, 2015
By establishing a regulated exchange, Bitcoin is provided with stability that the currency had not been afforded in the past.
With exchanges like Coinbase legitimising bitcoin, and helping to lift the dark shadow that the Mt Gox failure put over bitcoin trading, public perception of bitcoin will no doubt evolve. But how long will it be before small business owners can afford to take the plunge into dealing with virtual currency?
There are opportunities for small business owners to capitalise on bitcoin in ways that won’t expose them to the risks that have traditionally been associated with the currency. Enthusiasm for bitcoin has generated some great marketing and PR opportunities for local small businesses. The Sly Fox Café in Canberra generated some great PR out of a decision to accept bitcoin as a form of payment for its coffee. Meanwhile Hero Subs in Melbourne received significant attention through selling a sub sandwich on its menu that can only be purchased with bitcoin. There is also Bitcoin Gift Cards, a company selling gift cards for traditional bricks & mortar stores like Bunnings and Sportsgirl, but only accepts virtual currencies as payment.
Would you consider using virtual currencies like bitcoin in your small business, either for day-to-day business or for promotional opportunities? We’d love to hear your thoughts on bitcoin and other crypto-currencies.