5 Questions Your Business Should Consider About Cryptocurrencies
Many businesses are still hesitant to adopt cryptocurrency. The companies that have hopped on the bandwagon are the ones who—after hearing about how Bitcoin rose recently to above $50,000 this past year—are convinced that blockchain technology is the next big thing in business. These businesses believe that only a decentralized digital currency will be able to withstand the test of time.
On the other hand, the non-adopters believe that cryptocurrencies are only in a bubble that will pop at some point in the future. Maybe after hearing stories like the Mt. Gox fiasco, some are still skeptical about whether or not cryptocurrency is safe and reliable. They maintain the belief that fiat currency will always be needed based on the argument that people have a general distrust for digital currencies.
As cryptocurrencies continue to rise in popularity, it has become an increasingly viable alternative to bank accounts for many people. Cryptocurrencies can also be used as a method of payment, which banks can’t do. And unlike banks, they can be accessed by anyone, anywhere, without needing to use a bank account.
More and more businesses wonder whether they should get in on the action enabling their customers to use digital wallets to make payments, and even accepting digital currencies in exchange for goods and services. So, should your business join the crypto craze?
If you’re thinking about accepting cryptocurrency for your business, there are a few important things to consider first. Understanding the risks and rewards is vital to protecting your business, and ultimately your bottom line. As with any other type of payment method, there are pros and cons to accepting digital currencies. Here is a list of five questions to ask to determine whether or not cryptocurrency could potentially serve as a strategic fit for your business.
How Would Your Business Adopt Cryptocurrency Into its Operations?
Before all else, identify the realistic use cases for cryptocurrency and how it would benefit your business. For example, many small businesses have started to implement blockchain technology into their daily operations by accepting cryptocurrency as a method of payment.
Unlike credit card payments or bank transfers, cryptocurrency payments aren’t subject to strict international exchange rates since the currency is a global network that is not tied to any specific country or bank. Plus, the fees for accepting cryptocurrency payments are far less than those for credit card payments.
Does Your Management Already Have the Infrastructure in Place to Support the Adoption of Cryptocurrency?
Before adopting any sort of cryptocurrency technology, ensure your business is prepared by implementing the necessary changes to accommodate such new technology. Are your IT, finance, and security teams ready to accept cryptocurrency? Cryptocurrency technology presents a steep learning curve, particularly for small business owners unfamiliar with the technology. The planning stage also includes implementing an effective method for modeling and mitigating risks.
Since adopting cryptocurrency entails entering new territory where regulations are still under development, it’s vital for your business to have a clear policy surrounding cryptocurrency. The policy can outline which cryptocurrencies you accept, how you will handle security and accounting, and what the company will do if they detect any illegal activity. Policies are important both for managing cryptocurrency and for protecting the business’s information.
Is Your Business Prepared For the Global Implications of Cryptocurrency?
Accepting cryptocurrency opens up your business to a larger global audience. While the centralized nature of traditional currencies makes it easy for governments to regulate them, cryptocurrencies are decentralized. Because of this, many are concerned that the decentralized nature of cryptocurrencies means they lack accountability and oversight. That being said, one of the main benefits of cryptocurrency is its global outreach, in terms of its speedy transactions and the ability to buy and sell globally without currency conversion costs.
Does Your Business Understand the Security Concerns for Cryptocurrency?
Businesses have traditionally relied on centralized institutions to verify transactions and keep the books. However, this reliance has made businesses vulnerable to fraud and chargeback risks. Cryptocurrency, on the other hand, relies on blockchain technology to create and track transactions. Blockchain is a distributed public ledger that is transparent and immutable. Since each exchange is linked to the previous one, it creates a permanent and verifiable record of all cryptocurrency exchanges.
While the cryptocurrency market is more transparent than it’s ever been, thanks to the rise of robust tracking platforms, the cryptocurrency market is largely unregulated. In the current environment, it is up to you to ensure that your business is ready for the risks associated with cryptocurrency. This includes making sure that your employees have all the knowledge they need to deal with cryptocurrency and that your business has adequate security measures to protect itself against cryptocurrency-related fraud.
Is Your Business Aware of the Tax Framework and Implications?
It’s important that business owners understand how cryptocurrencies are taxed in the U.S. Cryptocurrencies, like Bitcoin, Ethereum, and others, have a built-in transaction log—no government body can suddenly decide that the logs will be deleted or modified or that they will tax the additional transactions, since they already have access to the information. However, the IRS has made it clear that any and all capital gains, which can be considered taxable income, are their business. The IRS may issue further guidance and clarification, which could mean that business owners need to account for new tax obligations over the coming years.
Not a Black and White Decision
Cryptocurrency has taken the world by storm, but not all businesses are prepared to handle it. The infancy and volatility of cryptocurrency make it a challenging decision for businesses to decide whether they want to take on the risk of adopting a technology that is only just starting to become mainstream. Accepting cryptocurrency payments for goods and services is a pretty big deal, as it opens up a whole new customer base for your business. But what’s most important is that it makes your business more competitive in the marketplace.
Cryptocurrency is accepted by a growing number of businesses, including some huge global brands, and you may be missing out on an opportunity if you haven’t added it to your business model. That being said, cryptocurrency might slowly catch on or be rejected altogether, and some companies vow to never accept cryptocurrency. Responding to the questions above is a good start for your business to determine whether cryptocurrency could be suitable for your business.