Crypto adoption is increasing in our world no doubt. You can go to Paris with your heartthrob and patronize Burger King then pay with cryptocurrency. You can as well shop for your wedding outfits at any Ralph Lauren store and then pay in crypto.
However, your shopping to get other things and pay with these digital assets may not be complete as many other merchants haven’t put crypto into their plans.
In this article, we’ll discuss the challenges with merchants’ crypto adoption. Let’s get right into it.
Crypto Adoption Worldwide
Demand for crypto payments is rising among both businesses and consumers. Considering the growing trend of crypto payrolls among enterprises, remote workers, and developing nations, digital asset payments might help businesses reach a new audience that is actually willing to spend coins to cover everyday expenses.
However, major market challenges significantly slow down enterprise crypto adoption, presenting new barriers for merchants.
What are the Challenges of Crypto Adoption for Merchants?
Discussed below are the major challenges of crypto adoption by several merchants worldwide.
1. High Volatility
The high volatility of cryptocurrencies is considered among the top barriers to their payment adoption. Indeed, crypto is among the most volatile asset classes out there. Based on this chart, Bitcoin’s one-year volatility is three times larger than oil’s and nearly 13 times higher than that of gold.
Since cryptocurrencies are susceptible to extreme price swings in short periods of time, they pose increased risks for merchants. Even before receiving the payment from the customer, they could lose 5-10% (or even more) of the order value on a day when the market is highly volatile.
Fortunately, this challenge can be easily tackled with stablecoin payments. As their value is pegged to the price of major fiat currencies like the USD and EUR, stablecoins offer an excellent way for both merchants and their customers to minimize the negative impacts of volatility.
Stablecoins can also come in handy during the current bear market conditions as they are the only categories of cryptocurrency that have a stable price (pegged to the USD).
2. Expensive Blockchain Fees
One of the major downsides of top decentralized blockchain networks is limited scalability. Consequently, they become congested during bull markets and periods of rising user activity, exponentially increasing transaction fees to levels unsuitable for many consumers and businesses.
For example, the average ETH transaction fee typically ranged between $25 and $60 during the peak of 2021’s bull market, which made the Ethereum blockchain unviable for small payments. This presents a major problem for both retailers and their customers, as most consumers would be uncomfortable with paying an additional 20 per cent on top of their order value just to use digital assets as a payment method.
Not mentioning the dissatisfaction that may occur for merchants if they have to wait even a minute of extra time receiving a transaction. Instead, they will leave their coins untouched in their wallets and use fiat for shopping.
As I see it, merchants affected by the issue can integrate cryptocurrency payment methods across multiple blockchains. In addition to Bitcoin and Ethereum, it is also a good idea to support digital asset transactions via high-throughput networks like Ethereum layer-two (L2) chains, Solana, Tron, and Binance Smart Chain. While this provides more choices for customers, they also have access to cost-efficient and fast alternatives to settle their payments.
3. Lack of Compliance Tool
Another challenge with crypto payments is a lack of proper compliance solutions. The lack of regulatory framework in the crypto sector doesn’t assist in this matter. As it may be unclear which party is responsible for payment compliance and merchants don’t have access to the automated systems they could use to report transactions to regulators, they are assumed to do the whole process manually.
Consequently, for a merchant that accepts hundreds of crypto transactions every day, this means having to expend additional valuable resources to comply with regulations. The good news is that outsourcing this process can easily solve the issue, especially considering that multiple services on the market offer automated transaction reporting and compliance management features.
How Important is Crypto Adoption for Merchants Worldwide?
Crypto payments can help merchants scale their businesses, attract new customers, cut their costs, and reduce the risks of chargebacks. However, mainstream adoption won’t come until market players manage to tackle several challenges, such as volatility, gas fees, and automated compliance.
While the market still has plenty of room to mature, retailers already have access to the solutions that can remove most of the barriers to crypto adoption. In the future, cryptocurrency adoption and education among consumers will likely be at high enough levels that it will become a must for every business to accept digital asset payments.
Closing Thought
Many crypto enthusiasts see a world where everything will be bought in digital currencies. As Tesla, Burger Kings, Mcdonalds’, Ralph Lauren, NBA’s Maverick and many more already accepting Bitcoin and other crypto assets, do you think other businesses and companies will join too?
Share your feedback with us in the comment section.