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How digital assets and blockchain are empowering small businesses

Tl;dr: Small businesses today are leveraging the revolutionary potential of digital asset and blockchain technologies to address their distinct challenges. A new primer by the Coinbase Institute explores how these technologies can make everyday processes for small business more accessible, automated, and secure.

By Coinbase Institute

Policy

, January 24, 2024

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Coinbase is on a mission to increase economic freedom for more than 1 billion people. We’re updating the century-old financial system by providing a trusted platform that makes it easy for people and institutions to engage with crypto assets. We also provide critical infrastructure for onchain activity and support builders who share our vision that onchain is the new online. Together with the crypto community, we also advocate for responsible rules to make the benefits of crypto available around the world. This is because we understand that the current financial system doesn’t work well for everyone. In fact, only 9% of Americans are satisfied with the status quo. But specific groups within the U.S. economy have even more reason to want to build something new. 

Take small businesses. There are over 33 million in the U.S. and they have an outsized impact on the economy, contributing 44% of the U.S. GDP and employing almost 62 million workers, or nearly half the U.S. workforce. 

But small businesses face many obstacles that are exacerbated by a financial system whose underlying technology is more than half a century old. These challenges include limited access to credit, liquidity, and high transaction fees that make growth difficult. 

A new primer by the Coinbase Institute shows how small businesses can leverage digital assets and blockchain to address these challenges across five key areas: loans and credit, payments, regulatory compliance, logistics, and cybersecurity.

Each of these areas illustrate particular weaknesses in the current financial system and are serious pain points for small businesses. Take payments where credit cards — the most common method of payment for U.S. consumers — impose fees of up to 3.5% per transaction, costing merchants over $125 billion in 2022. Or the significant cost of complying with a variety of state and federal regulations, which depending upon the business, can also include keeping track of numerous permits, licenses, and certifications and associated reporting obligations. Or the challenge of securing financing: in 2023, fewer than half of small business owners felt they had sufficient access to capital or loans.

The decentralized, secure, and inclusive nature of digital assets and the blockchain can help, and the primer explores how these technologies, supported by a rich and growing ecosystem of developers and firms, can empower small businesses to secure funding, process payments more quickly, comply with regulations, track parts through the supply chain, and secure sensitive data.

While no single technology is a panacea to these widespread and longstanding problems, and digital assets and blockchain face their own challenges to widespread adoption, they offer an innovative and increasingly popular model for doing business that can be more inclusive, efficient, and secure.

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