May 22 is called “Bitcoin Pizza Day” because on this day in 2010, a developer named Laszlo Haneke was involved in what is widely considered to be the first commercial cryptocurrency transaction: he bought two pizzas for 10,000 bitcoins. Given the current price of bitcoin, that’s over $170 million per pizza.
Twelve years later, Bitcoin is growing in popularity, especially in the tech and investment world, but businesses that accept any form of cryptocurrency are still considered something exotic.
However, if the development of cryptocurrencies as a means of doing business follows the typical curve of technology adoption, many early adopters will soon follow. So, should your business start accepting cryptocurrencies as payment for goods and services? Depend on. It will inevitably become an easier process, but today there are still complications and risks to consider – as well as many potential benefits.
Advantages and disadvantages of adopting cryptocurrency
When it comes to cryptocurrency, one person’s “cheat” is the other’s “cheat” – so how well your cryptocurrency business works largely depends on your goals and appetite for it. risk.
Pros: Payments are non-refundable
The fact that crypto payments are irreversible is an advantage for businesses. Only the company receiving the payment can issue a refund – no third-party payment processor can refund a payment in response to an unfounded fraud allegation.
Pros: No payment processing fees
Also, unlike credit card transactions, there are no “middleman” payment processing fees associated with crypto transactions. Since it is a digital currency that does not pass through a bank or a third party, there are no transfer fees for the customer and the company to accept Bitcoin.
However, it is important to note that a business must pay a fee to convert bitcoins to dollars if they choose to do so. Companies like Coinbase offer (paid) trading services that instantly exchange digital currencies for their monetary value.
Pros: Opens stores in new markets
An often overlooked benefit for a business accepting cryptocurrencies is that it can open businesses – especially those with e-commerce capabilities – to new markets, both domestically and internationally. The cryptocurrency community is a tight-knit community that tends to help businesses get started in the fight against cryptocurrencies. Selling overseas can become more viable and affordable by eliminating the high fees and transaction costs typically associated with using traditional currencies.
Disadvantages: regulatory and tax uncertainty
Regulatory and tax uncertainty is one of the main barriers preventing more businesses from adopting crypto. Currently, the IRS treats cryptocurrency (which it calls “virtual currency”) as property for federal income tax purposes.
This means that the business owner must keep accurate records of transactions, because when the business owner exchanges virtual currency for what the IRS calls “real currency” (i.e. US dollars), the business should recognize any capital gain or loss from the sale record on the fair market value of the cryptocurrency upon receipt.
Pros and Cons: Cryptocurrency Price Volatility
For some businesses and entrepreneurs, the volatility in the price of cryptocurrency is frightening. For others, it’s a value proposition. After all, $100 worth of Bitcoin at the start of 2019 was worth over $1,000 at the start of 2022, more than 10 times the yield. Since then, however, bitcoin has declined, although (as of mid-June 2022) it is still much more valuable than it was in 2019. The point is, if you decide to embrace the crypto- currency, put it together.
The final risk to mention is that if your business has a regulatory regime that affects how you receive payments from clients or customers, it is important that you understand the implications of adopting cryptocurrencies.
For example, before I started accepting crypto payments from clients as the owner of a law firm, it was important for me to understand how to do so in accordance with the ethical rules that govern attorney-client relationships, including the taxi payment and management
Practical steps for businesses to accept cryptocurrencies
For a company that has decided that the pros of adopting a cryptocurrency outweigh the cons, the next step is to go through the logistical process of setting up digital currency transactions. The good news is that you don’t need to be a technology expert to get started.
1. Set up a crypto wallet
This first step is to set up a crypto wallet, which acts like a bank account that you use to send and receive digital currencies. Some wallets can only be used for one cryptocurrency like bitcoin, while others hold multiple currencies. There are many different wallets to choose from.
Security is important factor when choosing a wallet. Unfortunately, cyber criminals are looking for ways to steal cryptocurrencies, and how a company or individual handles their currency can make them more or less vulnerable to attack. In general, cold wallets that are not connected to the internet are more secure than hot, connected wallets. While using a hot wallet can be less secure, for many this risk is offset by the convenience of hassle-free online transactions.
2. Choose a payment method
As far as a company wants to exchange cryptocurrencies for dollars, it has to choose a payment method like Coinbase, BitPay or CoinGate. Since some carriers act as both processor and wallet, you can complete both steps in one go.
3. Decide how to accept crypto payments
The final step is figuring out how to accept crypto payments through your website, for example, and buying and setting up the right technology to do it. It’s not as difficult as it seems. If your business is planning to accept crypto payments through its website and already has a digital wallet set up, adding a plugin to your Shopify or WordPress website can be as simple as that.
Should your business accept cryptocurrencies?
Only you can answer this question, but I hope you now understand better what I’m talking about.
A recent survey found that 56% of US adults own or own cryptocurrencies, and nearly 18% of US adults who have never owned crypto plan to buy one next year. So this is a growing market that your business could touch.