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Why High-Risk Businesses Use Cryptocurrency

4 Mins read

Since the first cryptocurrency was created in 2009, the use of blockchain-based digital assets has increased exponentially. This has paved the way for businesses to incorporate cryptocurrencies into their payment systems, as well as for individuals to trade and invest in digital currency. Many businesses are turning to cryptocurrency to help solve some of the problems they face, and it has particularly become a useful tool for businesses at the high-risk end of the spectrum.

The idea of using cryptocurrency to solve the problems of high-risk businesses is an interesting one, as cryptocurrency has many features that can help with this process, such as removing the barriers faced with traditional banks. First off, before diving into high-risk use cases for cryptocurrency, let’s define high-risk businesses.

What is a High-Risk Business?

The term “high-risk business” is used to describe a business that meets one or both of two conditions: it operates within a high-risk industry and has a high chance of failing. As the traditional financial institutions increasingly tighten their grip on the financial industry, cryptocurrency seems to have become the currency of choice for businesses that deal with high risk.

Since businesses working in any of the high-risk industries—including those dealing with sex, drugs, weapons, and gambling—can become targets for government scrutiny, they often view cryptocurrency as an ideal way to keep their operations afloat. The blockchain technology behind cryptocurrency makes it relatively easy to set up a virtual payment system that is not linked to any real-world entity. This is especially appealing to businesses that want to avoid being tied to any one nation. 

Benefits of Cryptocurrency for High-Risk Businesses

The key feature of a cryptocurrency is that it is not issued by any central authority. As a result, it would be theoretically incapable of being interfered with or manipulated by a government. This makes it very secure, as it is not possible for hackers to target one specific group to get into the system. In turn, this also means that there is no one central group that can shut down the currency. 

Further, most high-risk businesses need to be able to send and receive payments easily, without the need to disclose sensitive information to a third party. This can become challenging with standard payment systems that typically have high processing times. 

Lastly, cryptocurrency is one of the few payment systems that allow for a high degree of anonymity and security on both ends, making it a perfect fit for both the customer and the business. This makes the use of cryptocurrency and the blockchain technology that underlies it particularly attractive for businesses in the following sectors.

The Cannabis Industry

There are a whole host of reasons why high-risk businesses, including those in the cannabis industry, are turning to crypto. For starters, in the U.S., even though cannabis is illegal on the federal level, marijuana is legal in several states, and recreational use is legal in others. This split in state and federal laws allows for marijuana and, by extension, the marijuana industry, to operate in a gray area, where banks aren’t willing to work with them. This creates problems for companies who need a way to pay their employees, vendors, and taxes. In effect, this means that using cryptocurrency is one of the only ways for the marijuana industry to operate and, therefore, is becoming more and more common.

Gambling

The gambling industry is notorious for being early adopters of new technologies. As far as the gambling industry is concerned, Bitcoin was the first and most popular cryptocurrency. In fact, the gambling industry accounts for about half of all Bitcoin transactions, and there are several online gambling sites that accept Bitcoin exclusively.

To understand why this industry is so open to cryptocurrencies, you have to look at the problems the industry faces when it comes to payments. Online gambling is illegal in several countries, and even in places where it is legal, payment options are limited. In the United States, for example, online gambling and the use of credit cards are legal and regulated by the state, not the federal government. 

Startups

The top cryptocurrencies, like Bitcoin and Ethereum, are increasingly being used to fund new startups. This might seem counterintuitive at first. Cryptocurrency is a digital currency that isn’t controlled by any central bank, so why would a startup want to use it instead of actual cash? The reason is actually quite simple: cryptocurrencies eliminate the need for third-party payment processors.

Another reason for startups to start using cryptocurrency is to gain access to funding from the blockchain community. Many blockchain aficionados are early cryptocurrency investors and are willing to financially back projects that align with their ideals. Getting funding from cryptocurrency stakeholders means startups can focus on building their businesses rather than scaling up their operations to pay the bills. A great example of this is Ethereum-based Consensys, which has received $3 million from investors who want to see the Ethereum ecosystem grow.

Final Words

Whereas low-risk businesses can open bank accounts with relatively few problems, high-risk businesses face a number of banking problems, including strict laws for reporting and fraud prevention, that make it difficult to operate. Often, high-risk businesses are shut out of the banking system entirely because of strict regulations, which means they have to find alternatives to banks. Cryptocurrency offers a way around these barriers, making it easier for these businesses to accept international payments and pay their employees.

High-risk businesses have long been a target of thieves and fraudsters, both because the owners can’t always rely on local police for protection and because many high-risk businesses are cash-rich. Cryptocurrency is a fast, secure way to transfer money with minimal transaction fees. That’s why cryptocurrency businesses are adopting this payment method in droves.

With cryptocurrency, high-risk and low-risk businesses alike have the opportunity to make more money, increase the speed of their transactions by using a decentralized system to do business and help protect themselves from fraud. Plus, the high risk/high reward nature of cryptocurrency means that it’s often a smart option for the most innovative companies looking to grow.

 

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