Small Businesses Benefit from the Use of Digital Currencies

The foundations for building new payment rails that can move value around the world in real time are provided by digital currencies. They’ve sparked a fierce debate about how they threaten traditional financial intermediaries. Who is responsible for the high costs and long payment delays caused by an antiquated and inefficient payment system? The typical small business has only enough cash on hand to last a few weeks at most. As a result, there is a high degree of exposure to economic shocks like the financial crisis of 2008.

Intergenerational mobility and social inclusion rely heavily on small businesses. In addition, they provide a stepping stone for people from marginalised groups to rise up the economic ladder. Small businesses find it difficult to maintain healthy cash reserves because of the difficulties in obtaining credit and the delays in receiving payments. Payments’ long-term resilience could be improved through increased competition and innovation. When dealing with transfers across borders, these problems are made worse by the high fees and long wait times.

Efforts in the public and private sectors, such as FedNow and CDBCs, should be combined. Competitiveness, lower transaction fees, and the unbundling of services will result from an open payment system. The number of parties involved in money transfers would be reduced if funds were transferred directly over a blockchain.