At the business level, commercial transactions are carried out through B2B (Business-to-Business) transfers, typically involving companies and suppliers. Currently, thanks to the rise of digital platforms, blockchain technology, and e-commerce, companies have begun to adopt cryptocurrencies to optimize their commercial transactions.
For chief financial officers (CFOs) managing business-to-business (B2B) transactions, adopting cryptocurrencies can provide certain competitive advantages, including increased speed, lower operating costs, and greater transparency. However, this transition is not without challenges. Below, we’ll explain how cryptocurrencies can be integrated into a company’s B2B operations, as well as the key benefits, challenges, and best practices for adapting to this new environment.
Why consider cryptocurrencies in B2B transactions?
Fiat currencies, backed by governments and managed by central banks, have been the mainstay of B2B transactions for several decades. However, cryptocurrencies, based on blockchain technology, offer unique features that are attracting the attention of several companies for the following reasons:
Speed
Cryptocurrency transactions can be completed in minutes or even seconds, which is faster, especially compared to other traditional banking methods, such as bank transfers (which can take days). While faster systems like SEPA Instant exist, many of these systems are limited to certain territories or don’t operate globally.
Reduced costs
Cryptocurrencies operate on decentralized blockchain-based networks, which eliminate intermediaries such as banks, payment processors, and clearinghouses. This helps significantly reduce transaction fees, especially for cross-border payments. Another point to keep in mind in this regard is that different cryptocurrencies and blockchain networks compete to offer faster and cheaper transactions, which benefits both businesses and end-users.
Transparency and immutable records
Blockchain technology is characterized by being a transparent, decentralized system with immutable records. This is because every piece of information (related to each operation or transaction within the network) is recorded and cannot be modified or deleted. This characteristic enables blockchain to function as a general ledger or cryptographic accounting system, facilitating auditing processes and reducing the risk of fraud.
Traceability
Blockchain technology can track and verify the traceability of all information related to each transaction within the network, as this information has been recorded on each node along the blockchain. This allows each user to access and view all operations carried out during a given period, in addition to making contributions and synchronizing all information.
Global access
Cryptocurrencies allow businesses to conduct transactions with partners in remote regions or where banking systems are underdeveloped or have foreign exchange restrictions. Likewise, in regions with a high unbanked population (approximately 1.4 billion people, according to the World Bank), cryptocurrencies provide access to various financial services, including savings, loans, and remittances.
Challenges of using cryptocurrencies in B2B transactions
Despite their advantages, cryptocurrencies present certain challenges that CFOs must address:
Volatility
The prices of cryptocurrencies, such as Bitcoin or Ethereum, can be highly volatile, posing certain risks for companies that hold crypto balances. However, companies can choose which type of cryptocurrency to work with or opt for a stablecoin. An example of this is the USDC stablecoin, which is pegged 1:1 to the US dollar. This means that each USDC token is backed by one US dollar in cash or some equivalent asset, helping companies protect themselves from the volatility of other cryptocurrencies.
Regulatory compliance
Cryptocurrency regulations vary by country and are constantly evolving, requiring ongoing monitoring to ensure compliance with the different laws and regulations of each country or region. For example, CASP licenses (Crypto Asset Service Provider) schemes allow specialized entities or companies in the European Union to offer financial services related to digital assets and cryptocurrencies.
Security
Even though blockchain technology has been designed with a high level of security, this security depends on the network and its users. For example, wallets and exchange platforms can be vulnerable to cyberattacks if robust security measures are not implemented.
At this point, we should emphasize that blockchains can be susceptible to 51% attacks (when a group of miners or an entity controls more than 50% of a blockchain’s hashing power and assumes control over it), which can result in transaction manipulation. Private keys can also be stolen, resulting in asset loss.
Limited adoption
Not all companies are prepared to accept cryptocurrencies, which may limit their use in certain industries or regions. Likewise, there may be certain technical, regulatory, economic, and social barriers that could hinder their widespread use globally.
Accounting complexity
Integrating cryptocurrencies into a company’s accounting systems requires adjustments to the organization’s existing processes, as current accounting standards are not always adapted to this type of digital asset.
Steps to implement cryptocurrencies in B2B transactions
Evaluate feasibility
Before adopting cryptocurrencies, CFOs should conduct a thorough analysis of the following points:
– Identify use cases: Evaluate which types of transactions (e.g., cross-border payments or recurring billing) could benefit most from using cryptocurrencies.
– Analyze business partners: Determine if B2B partners are willing to accept cryptocurrencies.
– Evaluate costs and benefits: Compare traditional transaction fees with those of cryptocurrencies, also considering implementation costs.
Choosing the Right Cryptocurrency
Not all cryptocurrencies are ideal for B2B transactions. Some popular options include:
– Bitcoin (BTC): Widely accepted but with slower transaction times and higher volatility.
– Ethereum (ETH): Supports smart contracts, useful for automated settlements.
– Stablecoins (USDC): Pegged to fiat currencies, they offer price stability and are ideal for mitigating volatility.
Choosing the right supplier
It’s important to select a suitable supplier. To assess this, the following factors can be considered:
– Experience: The supplier must have several years of experience in the sector. For example, a supplier with more than three years of experience will be more reliable compared to another supplier that has only been in operation for six months.
– Security level: The provider’s platform must maintain a high level of security, as this will provide greater peace of mind for users and reduce the risk of loss or theft. Key security measures include transaction approval, identity verification, multi-asset custody, data encryption, and multi-factor authentication, among other security protocols.
– User-friendly and intuitive platform: The easier, more user-friendly, and intuitive the provider’s platform is, the better the user experience and efficiency when managing these types of digital assets. We must keep in mind that if the platform is difficult to use, we won’t be able to take full advantage of all its tools and features.
– Local language support: The provider must offer support in your local language, as this will facilitate communication, enhance the user experience, and expedite problem resolution.
– Licenses and Permits: The supplier must have the appropriate licenses and permits, as this ensures a certain level of oversight and quality in the products and services offered.
Comply with regulations
– Know your local laws: It is important to consult with legal experts to understand the tax regulations in your jurisdiction.
– Document transactions: It’s recommended to keep detailed records of all cryptocurrency transactions to facilitate auditing processes. In many cases, providers also offer virtual currency accounting services.
– Monitor regulatory changes: Cryptocurrency laws change rapidly, so it’s crucial to stay up to date.
Train the financial team
– Educate staff: We must ensure that the finance team understands how cryptocurrencies work and the best practices for using them.
– Establish clear policies: Procedures for managing crypto assets should be defined, including conversion to fiat currency when necessary.
Pilot project
The company can begin with a pilot project in a specific region or with a specific business partner, as this will enable the company to assess the benefits and address potential issues before implementing a large-scale solution.
Best practices for CFOs
Below, we share some tips for CFOs:
Mitigate volatility
To mitigate or control volatility, it’s recommended to use (at least initially) stablecoins like USDC. Another alternative is to immediately convert the received cryptocurrency to fiat currencies after receiving a payment.
Diversify risks
It’s recommended not to rely exclusively on one cryptocurrency, as this makes us more vulnerable to external factors. For example, instead of using only Bitcoin, we can also use other recognized cryptocurrencies such as Ethereum or USDC.
Partner with trusted suppliers
It’s recommended to work with recognized platforms or trusted providers. For this, it’s essential to take the time to evaluate the provider’s experience, permits/licenses, the reputation of its founders, and the versatility of its platform.
Automate processes
It’s important to automate certain processes, as this will increase the productivity and efficiency of the entire organization. For example, some providers offer batch payment services, which allow multiple payments to be made in a single transaction. This optimizes the group payment process (employees, suppliers, etc.), saving time and reducing the percentage of manual errors, which significantly improves the company’s operational and financial efficiency.
Monitor performance
It is recommended to regularly evaluate the impact of cryptocurrencies on a company’s operating costs, in addition to verifying the effectiveness of operations and the level of customer satisfaction.
What do you think about this topic? Do you want to learn more about B2B cryptocurrency transactions?
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