In this latest post in the Future of Money series I look at how entrepreneurs can prepare for the CBDC era. In the last two posts I explained how and why the future of money is changing and what Central Bank Digital Currencies (CBDC) are.
The dictionary definition of an entrepreneur is a person who sets up a business, taking on financial risks in the hope of profit. One of the key traits of an entrepreneur, therefore is that they spot opportunities and take the initiative. Here are 6 steps you can take, now today, before CBDCs arrive, so that you are ready to take advantage of the opportunities that will arise and also mitigate against any potential threats.
1. Stay Educated
Instead of waiting for the inevitable or hoping that the situation just doesn’t happen, arm yourself with the knowledge you need. The key source for information here will be your own country’s central bank, for instance The Bank of England, The Federal Reserve or the European Central Bank. The other source of information is your own Government’s department for financial affairs e.g. HM Treasury in the UK. Follow all their updates, you cannot rely on the media outlets and online gurus to give you unbiased information as they will have their own agendas to fulfil. Above all do not fall for the misinformation online that is rife.
Some examples of the types of information to look out for are whitepapers, pilot results and any legal changes.
2. Digitise Your Business
In the previous post What is a CBDC and Why It Matters to Everyday Investors, I give you a breakdown of the 4 types of currency that will be available. A versatile and adaptable business will make sure to be able to receive payment in all these types of currency.
Accepting Digital Payments
Start looking into how, now, you can move toward accepting digital payments. It is likely that the diverse types of currency will be interoperable, meaning that you could convert one form of currency into another. An example could be that you receive money as a CBDC, save it in your deposit account and then withdraw it as cash, or buy crypto.
Prepare Accounting Systems
Next, start preparing your accounting systems for real-time, programmable financial inputs. This might mean setting up cloud-based accounting software, which will support automation and real-time updates. I use Xero.com but there are also many others. The software should be able to integrate with your other platforms and tools to allow for seamless data flow.
3. Understand Compliance & Tax Implications
One of the reasons for implementing CBDCs is that there will be more transparency. This means governments will be hoping that they can ensure that people stay compliant and they can collect taxes more effectively.
CBDCs will have some automation features therefore individuals will have to stay ahead of reporting standards.
To prepare yourself, ensure your business is above board and can manage increased transparency.
4. Explore Opportunities in Fintech
Points 1-3 above are more about how you can prepare so that you are ready for when CBDCs eventually arrive. There are however opportunities for you to take advantage of their arrival, particularly around Fintech (Financial Technology).
Consulting Service
There will be opportunities to offer consulting services. Many businesses and individuals will not be ready, that is just the nature of things. Once the inevitable happens, they will be at risk of being left behind. Could you offer a service that gets them compliant or provides education for them? Or how about providing an app that offers digital wallet integration?
Programmable payment services
In the previous post I looked at how the digital currency can be programmable, for example money which needs to be spent within a certain time or in a certain way. Could you launch a service for a programmable payment scheme? Some more examples could be for companies how have a subscription model or use smart contracts.
5. Build Resilience
As we alluded to before, there will be 4 types of currency available: Cash, CBDC, Commercial bank currency (your normal deposit money) and Crypto. The savvy entrepreneur will now be starting to look at putting in place diverse payment systems to receive and spend money.
There will also likely be disruptions as people and other organisations start getting used to the new form of working. If you are not reliant on one form of currency, you should be better able to withstand the disruption.
6. Innovate
Finally, as entrepreneurs we are used to finding new ways of operating and looking for innovations. If you adopt the mindset that this is an opportunity for your own wealth creation, as the CBDCs come into play, you will spot gaps in the market. Here are some examples:
- How can programmable money enhance my offers?
- Can I create tools, apps, or platforms that help others adapt to CBDCs?
- What new problems will businesses face that I could solve?
Examples of entrepreneurial angles
Here are some readymade ideas for tools and services that will become business models:
- CBDC-ready POS (Point Of Sale) systems for small businesses. For example, the actual hardware and software that shops will need to be able to process payments.
- Workshops or courses on CBDC use for consumers or freelancers. Leading up to the roll-out, people will require educating on CBDCs. Could you develop a course that takes them through it?
- Accountability tools that integrate tax, spending and CBDC flows for single individuals.
- Specifically, my area of Real estate, may require new platforms that process rental or deposit payments in CBDC
- Freelancers will require platforms that pay in CBDC with smart contracts
Summary
CBDCs are coming and as entrepreneurs we need to accept it. There will be disruption but by getting ahead of the game we can make sure we are prepared. We should also embrace it as an opportunity. Throughout history fortunes have been made when large scale disruptions occur. Those who do not adapt will be left behind. We just need to remember the fate of Blockbuster Videos, as opposed to Netflix.
So, make sure you get educated. In future posts I will be discussing other angles such as your mindset around CBDCs. I’ll also look at wealth building and retaining strategies.
At first, I was sceptical and a little fearful about CBDCs, but I’ve decided that this will be an opportunity to create massive wealth. Join me?