Adoption of Bitcoin as a Payment Method: An Empirical Investigation of UK Small and Medium Businesses

From the introduction of Bitcoin in 2008 by Satoshi Nakamoto, the cryptocurrency ecosystem can be seen as a disintermediating and disruptive technology which has incited huge growth of the fintech space over the last decade with an estimated 12,000 currencies in circulation. The growth of cryptocurrency is unprecedented and there is a world-wide increase in the number of companies that are accepting digital assets such as crypto currencies for transactional as well as other investment purposes. Despite the innovativeness of cryptocurrencies and the use of public, decentralised ledger through the underlying blockchain technology, small and medium businesses have been slow at adopting it. While several studies have looked at uptake of cryptocurrencies by using quantitative methods, there is a lack of studies employing qualitative data for exploring concepts and themes associated with the adoption of cryptocurrencies. The aim of this study is to uncover the qualitative factors that contribute to the adoption of cryptocurrency, e.g. Bitcoin, as a payment. Furthermore, researchers have paid attention to the adoption of this technology globally and very few studies focus specifically on public adoption and not much heed is given on determinants of cryptocurrency adoption especially among Small and Medium Enterprises (SMEs) and Micro SMEs (MSMEs). Using a sample of 75 SMEs/MSMEs in the UK, this study applies Leximancer qualitative tool to analyse the narrative data and identify the pivotal technology adoption factors. The UK has been chosen for this study as the Government has an ambition to make UK the “global hub for cryptoassets”. More specifically, the report by FCA showed that 2.3 million individuals in the UK owned cryptocurrencies in 2021 and this was estimated to grow further. This research has empirical and practical contributions related to the understanding of how users adopt new technologies in their own organizations. The findings show that social influence and benefits of the technology play an important role in adoption of Bitcoin, while regulation and lack of knowledge act as detriments in the adoption decision of business users.

I. Introduction

The emergence of new technologies has implications for how customers and organizations carry out transactions in business environments. There is a huge focus on flexibility and convenience from the customers while businesses look at cost and time efficiency. These are seen as drivers of technology acceptance in business settings in general and more specifically for payment platforms [1]. Businesses often aim to minimize costs through avoiding or even eliminating middlemen where possible while ensuring business operations continue smoothly. As such, Decentralized Finance (DeFi) technology “enables financial transactions and interactions happen by eliminating or marginalizing the need for traditional intermediaries” [2]. Cryptocurrencies are seen as a reflection of this emerging financial system because it promises cheaper, faster transactions that are peer-to-peer while ensuring efficiencies in asset transfers using protocols supported by the blockchain. In traditional markets, transactions are slower and more expensive considering the number of intermediaries. This is especially true in the case of cross-border payments that are not transparent, riddled with uncertainties, liquidity blockage and risk of frauds [3]. In a digital currency market, these inefficiencies are removed, while transaction time and costs are decreased. Furthermore, security of transactions is provided by the distributed ledger technology (DLT) which offers immutability of transactions, anonymity and privacy [4], with transactions being efficient and straightforward [5]. To this end, adopting cryptocurrency is appealing because: “users get to control their own money” [6]. Despite its appeal, the adoption of cryptocurrencies alone cannot be a panacea for all financial inefficiencies of the centralized, traditional markets or enable businesses to completely overcome issues such as economic rents that particularly have a huge impact on Small and Medium Enterprises (SMEs) [7]. Nevertheless, it is still imperative to explore the factors of adoption of cryptocurrencies among SMEs considering their need for digital transformation [8], highlighting the opportunities and challenges of such adoption [9] and to fill in the dearth of research in this domain [10]. The diffusion of cryptocurrency payment is particularly relevant for understanding UK SMEs sector because the HM Treasury in April 2022 announced its regulatory approach to DLTs and cryptocurrencies, emphasizing the government intention to facilitate the regulation and adoption of cryptocurrency and stablecoins, including exploring how it can regulate DeFi loans. As such Kalifa Report on UK Fintech (2021) [11] emphasizes that UK government regulations should (a) focus on delivering better outcomes to SMEs and (b) maintain the UK's position as the best place in the world for cryptocurrencies.