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Should My Business Accept Cryptocurrency As Payment?

crypto payments

Cryptocurrency is becoming a more popular legitimate payment method for businesses, so many are now considering accepting this form of currency to complete transactions.

A business that accepts cryptocurrency as payment enjoys several advantages; they can get paid easily and quickly, there are no chargebacks or fees and they can also gain a diversity of customers including those who like paying with their crypto accounts. Business owners should balance these perceived benefits with the need to train staff on how to accept and process these transactions, including the potential for capital gains tax payments needed. 

If you’re thinking about accepting cryptocurrency for payments at your business, read on to find out more including the pros and cons of accepting it, volatility, tax complexities and the knowledge needed to manage it well.

What is Cryptocurrency?

Cryptocurrency is a way of paying for goods and services but doesn’t take a physical form like cash. Instead, it’s a digital currency and a unit of trading and purchasing, similar to traditional forms of currency.

Cryptos are stored via digital wallets and owners can access their crypto accounts securely through encrypted passwords whether sending or receiving cryptocurrency. Taking payments or making a crypto payment happens easily and quickly between parties worldwide anytime they want. They are not limited by financial institution operating hours such as banks and other payment processing services.

The first cryptocurrency was Bitcoin. It was created in 2008. Today, more than 10,000 variations of cryptocurrencies are circulating in the financial market. A cryptocurrency is decentralised, meaning that it doesn’t have to be processed via a financial institution like a bank or other payment processing service.

The Pros of Accepting Crypto

The number of cryptocurrency account holders and users is increasing so businesses are starting to take up the trend too. The benefits of doing so include:

Quicker and Easier Payments

Cryptocurrencies eliminate third party transactions like banks or payment processors. Transactions involve just the sender and its receiver so people can do business easily, quickly and at cheaper costs worldwide. Hence, more and more businesses are turning to cryptocurrency as alternative payment types.

No Fees

There is also the benefit of zero fees when you accept cryptocurrency payments. Unlike traditional forms of payments, particularly, debit and credit cards, there are no processing fees involved when you pay using crypto.

Secure Payments

The high security of cryptocurrency means it can’t be forged or payments can’t be revered. This peace of mind can be comforting for those new to this form of transaction.

Once the sender activates payment, there is no way to reverse the transaction entered into. Cryptocurrency transactions are registered on blockchain technology which are unable to be changed or edited.

Should there be an attempt to alter in some way, such activity is rejected. This is, of course, pre-arranged among parties and once mutual agreement takes place, it is highly unlikely for fraud to take place.

No Chargebacks

Cryptocurrency payments are not liable to chargebacks, where customers may dispute payments and businesses are liable to make refunds. SInce disputes and payment reversals are not entertained whatsoever, businesses won’t have to deal with loss of income and inconveniences due to payment disputes and refund requests.

More Diverse Customers

If your business accepts cryptocurrency as payment, you will definitely gain a wider customer base. People who prefer crypto payments over traditional payment modes will be attracted to your business. Additionally, using crypto payments keeps your business current with the times and trends in the financial market. Experts strongly believe that cryptocurrency will form a big part of business in the future.

The Cons of Accepting Crypto

Consequently, there are drawbacks when your business accepts cryptocurrency payments. Some of which are listed below for you:

There is a Lot to Learn At First

Understanding Crypto is the first step in being able to accept it as a payment method. With lots of variations on the market, each with its own transaction rules, you will need to know what you’re doing or invest in software that can easily keep track of payments in and out of the business.

As a result, using cryptocurrency for your business will require initial funding to set up and time to get to grips with the new system and ways of working.You must consider then if your business would really be at an advantage if you start accepting cryptocurrency payments.

The Way Crypto is Taxed is Complicated

Tax matters can get more complicated when you start accepting cryptocurrency. Due to the variation in the value of cryptocurrencies (they can go up and down), capital gains tax can become a requirement.

Capital gains tax is payable when you make a profit on certain transactions over your personal allowance. You must work with an accountant who has a good handle on how taxes work when it comes to crypto transactions and conversion of profits made from them.

You Have to Keep Detailed Payment Records

When it comes to cryptocurrency transactions, you must maintain a detailed and updated record of everything, just like your regular day-to-day accounting. Logs and records must be updated per transaction or daily.

This is important for transparency and accurate tracking of financial activities. Doing so will keep you out of trouble with tax authorities and you will be prepared to answer any questions at any time should tax authorities need to clarify some matters involving your financial documents and submissions.

Crypto Value is Volatile

One more drawback is market volatility. As with Bitcoin, other cryptocurrencies are subject to fluctuations in value. This can be a problem whenever your business converts crypto to cash. If you have to pay bills or supplier invoices and you convert your cryptocurrencies into cash at a time when values are low, you will lose money on the conversion.

This may put your business at high risk especially when you are converting large amounts of crypto with decreased values at the time of conversion. This will be even harder if your business only has limited resources or if your business has a very tight profit margin.

Other Considerations When Accepting Crypto

Liking the sound of Crypto so far? Here are some further considerations to be aware of:

Which Currencies Should You Accept?

You need to study and be confident about the type of cryptocurrency that you will accept as forms of payments. There are so many types of crypto being used today and new cryptocurrencies are being added continually. You need to have an understanding of the most commonly used cryptocurrencies with the most stable values, if possible.

If you’re looking at accepting less used or newer forms of cryptocurrency, consider the service of an expert to give you sound financial insight so that you do not lose out on a potential cryptocurrency transaction. Businesses shouldn’t expect experts to be 100% right, particularly, when it comes to assessing new cryptocurrencies. It is understandably hard to predict and ascertain concrete facts about any newly created cryptocurrency’s performance on the financial market and there is always an element of risk involved.

Which Wallet to Use

When you begin taking cryptocurrency as payment, you have to set up a digital wallet to be able to store all the cryptocurrencies that will come in. Digital wallets come with a software program that securely facilitates the sending and receipt of payments.

You’ll have varying options to choose from, and it is important to go with what will better fit the type and needs of your business. There are digital wallets that are better for business use and others that are good only for personal use. Following are some of your options:

  • Coinbase. It is a secure form of digital wallet that is easy to use and great for those who are just starting out with cryptocurrency transactions. New or small-scale businesses may find it as a good all-in-one solution for their needs.
  • Exodus. It is a desktop wallet with advanced security features designed to uphold user privacy. It features multi-sig support as well as double encryption for transactions.
  • Jaxx. It is a popular mobile wallet that features a simple, straightforward user interface. It supports a wide portfolio of cryptocurrencies and is great for businesses who need to manage multiple crypto holdings in one platform.
  • Electrum. It is another kind of desktop wallet that allows users offline access with less memory footprint. This is best for experienced cryptocurrency account holders. Electrum also provides multi-sig support and other advanced security features.

When to Convert to Cash

Once you have decided to accept cryptocurrency as payment for your business, you need to put a plan in place in regards to cash conversion schedules. Having a plan that lays out a strategy for when you convert crypto to cash is beneficial for your business and protects it against the volatility that prevails in the crypto market.

You could establish waiting periods, valuation points or volume points. This means waiting for a crypto currency to reach a specific value before converting it to cash or waiting for your crypto currency to reach a certain amount before going for cash conversion.

You may hear some experts that recommend quick cash conversion as soon as you receive cryptocurrency payments. This is a safe approach since the values of these cryptocurrencies, including Bitcoins, can drop in values very quickly.

Immediate cash conversion lessens any risk of income loss especially if the cryptocurrency suddenly falls in value.

Whether to Use a Payment Processor

Using payment processor services is an option if you prefer not to handle cryptocurrency payments yourself or if you just don’t have time to handle these transactions. You can hire companies that process crypto payments for businesses.

It is recommended to explore your options especially if you are not that confident in handling cryptocurrency dealings or you don’t have time to monitor the best times to convert these currencies into cash.

Here are some well-known payment processor companies:

  • BitPay: This company provides various services for businesses and regular users who accept Bitcoins as payment from their customers. BitPay is available to more than 200 countries worldwide.
  • CoinGate. This platform enables businesses to accept more than 50 types of cryptocurrencies as payments. Additional features are offered, including donation buttons, point-of-sale terminals and invoicing.
  • PayPal. This provider is widely popular among businesses and individuals. You can accept crypto payments from your customers in more than 200 countries.

Staff Training

Staff training will be required for all businesses looking to introduce this type of accounting.

Your staff must understand the nature, use and process of cryptocurrency payments and systems used must be updated to reflect the addition of this type of payment.

Staff need to be knowledgeable in making and receiving crypto payments, as well as the types of issues that customers may raise or ask about. Staff training will cost money and time so factor this as you deliberate on the need for and profitability of taking cryptocurrency payments for your business.

There are different ways to train staff, such as:

  • On-site training. This type of training is best for staff who already know the basics of cryptocurrencies. You can hire a trainer to conduct training for your staff in your place of business. Training can allow in-depth education on using this new system of payment.
  • Online training. Your staff can take online courses on cryptocurrencies. Courses are available and best for people who don’t have any knowledge and or experience with cryptocurrencies.

Online courses charge differently according to the scope or depth of learning that will be delivered. It is recommended to conduct research so you can determine which course will provide the best training for your staff at the best price.

Security Issues

Security is an important consideration when deciding to accept crypto as payments. You have to check and confirm that your operational systems are fully secure. This means using a trusted platform that provides utmost security for your digital wallets or payment processes.

Hacking is still a problem and some businesses have lost a lot of money because their system was hacked. Take precautions and make preparations so that you commence crypto transactions for your business at a most secure level.

It is of utmost importance that you can confidently assure any customer that their crypto accounts are safe and will remain safe after they transact with your business. Otherwise, you will not only lose customers, trust in your business will certainly drop and you will be less likely to attract new clientele.

Final Thoughts

Accepting cryptocurrency as payment can be a strong strategic move for businesses looking to get ahead or stay ahead of the curve and stand out from their competitors. Being able to meet the growing need for digital currency based transactions requires a careful approach when introducing it to the business for the first time.

Take a good look at the risks and responsibilities involved and have a plan in place for securing your payment infrastructure, staff training and how you will manage market volatility and tax payments due.

By weighing up the pros and cons objectively, you can determine if acting cryptocurrency is right for your business or not.

 

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