Demystifying Cryptocurrencies: Promise and Potential Lead to Growing Appeal
There are some potential downfalls or risks to accepting cryptocurrencies as well.
Roy Girasa, a professor in the Lubin School of Business at Pace University and author of Regulation of Cryptocurrencies and Blockchain Technologies, points to a number of risks that marketers need to know. They include the following
• a lack of acceptance by banks;
• a lack of government backing, such as the FDIC;
• use by drug dealers, money laundering rings, and other criminal elements;
• currency volatility;
• a limited user base;
• uncertainty concerning future regulation and tax treatment; and
In addition, the loss of the private key required to access cryptocurrencies will result in the loss of the currency—with no means to recover.
Still, it’s clear that many marketers are beginning to consider cryptocurrencies as another payment mechanism. The process itself is fairly straightforward.
For merchants, accepting cryptocurrencies can be likened to credit card payments, Fast says. “It’s pretty similar to other kinds of payment integration.”
But, at the same time, he cautions marketers to be careful. “The cryptocurrency space in general has been subject to a lot of companies that make overzealous claims that basically announce products that become vaporware or outright scams. Very large amounts of money are being spent on marketing for these companies that kind of gives a bad veneer to the space in certain quarters.”
A number of larger, more widely known companies are also entering the space. Facebook has been exploring the potential of this technology since 2018 and launched Libra in mid-2019.
“If that goes forward, it’s going to be a huge driver of user adoption,” Fast says. “For all of its flaws—and Libra does have certain flaws—it’s probably pushing us in the right direction in terms of the user experience and in terms of getting people more familiar with some of the benefits and the risks of these cryptocurrencies so people are able to safely use them in many more places.”
McCarville offers examples of companies that have targeted affluent and tech-savvy audiences with cryptocurrencies. One, Lolli, rewards users for installing its browser extension by giving them Bitcoin with each purchase through its browser. “By rewarding loyalty with payments of cryptocurrency, the company is essentially discounting their prices while attracting users who may not otherwise choose to do business with the company,” McCarville says. It’s an opportunity that other marketers could explore to tap into networks that could provide a significant increase in revenue.
Japanese retail giant Rakuten is another example. Rakuten, McCarville says, allows users who have existing rewards accounts and digital walls to convert their rewards points into cryptocurrencies, including Bitcoin and Ethereum. “This ability to allow users to monetize their rewards in either discounted prices or in converting to a cryptocurrency of their choice incentivizes consumers who are interested in acquiring cryptocurrencies,” he says.
One common myth about cryptocurrencies, McCarville adds, is that they are not regulated. That, he says, is not true. “Companies and users are subject to a host of regulatory issues that need to be understood and managed, such as federal and state taxation, money transfer laws, and Know Your Client and anti-money-laundering protocols,” he says.
Marketers interested in potentially using cryptocurrencies should first come up with potential use cases and then work to understand which regulatory issues might apply, McCarville continues.
For those unfamiliar with but interested in how cryptocurrencies work and, specifically, how they might work to engage current and potential customers, the best way to learn about them is by using them, Traidman suggests. “Download a wallet, send it between different wallets, and really feel what it’s like interacting with cryptocurrencies.”
Linda Pophal is a freelance business journalist and content marketer who writes for various business and trade publications. Pophal does content marketing for Fortune 500 companies, small businesses, and individuals on a wide range of subjects, from human resource management and employee relations to marketing, technology, healthcare industry trends, and more.