What a business needs to know about accepting cryptocurrency?
With cryptocurrencies expanding their reach among prospective buyers, business organizations across the globe are jumping on the bandwagon of crypto payments.
Crypto payments: Expanding Influence
With cryptocurrencies exploding in their popularity, businesses across the globe have started accepting digital coins as a payment method. Bitcoin and Ethereum are the most popular digital currencies and companies are adopting them to get rid of third-party intermediaries such as Banks, Financial Institutions, and Payment processing gateways among others. Not only this disintermediation saves a lot of transaction costs but also reduces the processing time associated with the transaction. Moreover, there is no hassle of converting the currency from one form to the other — e.g., Dollar to Euro and vice versa.
Accepting Crypto Payments: What Businesses Require?
To onboard the digital payment system, the first requirement is to have a cryptocurrency wallet. Depending on the method of storage, crypto wallets are classified into two forms — software wallets and hardware wallets. While the former stores the private keys in an online server, the latter preserves the addresses in the physical wallets. Both methods have their own share of merits and demerits and it ultimately depends on the choice between safety and convenience while one selects one method over another.
In addition to wallets, organizations can also avail services of crypto exchanges to store their private keys. Some of the reliable names in the category include Binance, Coinbase, Kraken, and Crypto.com among others. The primary advantage of these platforms is their third-party storage mechanism which allows consumers the facility to store their private keys on servers of third-party for enhanced safety and protection. Also, for online merchants who are interested to include crypto payment in the list of their paying options, Bitpay and Coinbase Commerce are also among great options to start with. Both these platforms allow online businesses to take payment in Bitcoin and the best part is that onboarding these payment processors are absolutely free of cost.
After having described briefly the advantages of digital coins, the crucial question here is whether your business is ready to accept cryptocurrency as a payment method? if yes, then here’re the key things that you need to take into account before integrating digital currencies into your business model:
1) Irreversible Nature
Cryptocurrency transactions are irreversible in nature — once the transaction is done, it cannot be reversed. This means in case of a mistake or accidental transfer, getting the money back into the debited account is extremely difficult — a refund is possible only when the credited account agrees to pay back the amount. This irreversible nature of crypto transactions demands that transacting parties must have a great deal of faith in each other. Another implication of irreversibility mandates businesses to keep close track of all crypto payments as customers can ask for refunds in certain conditions. In the absence of accurate records, the refunding exercise will be virtually impossible which, in turn, will bring a bad name to the company’s reputation.
2. Compliance with Tax Structure
The importance of complying with regulatory mandates for businesses couldn’t be overemphasized. In case a company decides to accept crypto payments, it has to exercise due diligence so that all statutory compliances, especially related to taxes and duties, are met fully and satisfactorily. The contentious issue here, however, is the varied nature of regulations related to cryptocurrencies across the globe. For example, businesses that accept cryptocurrencies in the US are subjected to capital gains tax although in Germany, Singapore, and Malaysia no such tax is levied on crypto assets. Hence, a business needs to be aware of the crypto regulations of the host country and in accordance with the law, it should file the tax returns.
3. Huge Accounting Exercise
Unifying crypto payments brings an enormous load on the accounting department of the organization. The value of Bitcoin and other digital currencies is very turbulent in nature — they keep on changing on a daily basis. This fluctuation entails continuous monitoring of digital currencies which in itself is an enormous task. To overcome this challenge, many small businesses across the globe accept crypto payments only for big-ticket items so that load on the accounting department can be reduced.
The crypto sphere is itself fully aware of the issue of the ever-fluctuating nature of cryptocurrencies. This explains the rising influence of stablecoins that offers the best of both worlds — stability of fiat currency and anonymity of cryptocurrency.
4. Anonymity: Both a Virtue and Vice
The anonymity aspect of cryptocurrency is like a double-edged sword — it’s beneficial to persevere the personal identity but at the same time, it can also be used for malicious activities such as money laundering, terrorism financing, and hacking activities. In fact, Bitcoin is the preferred choice of bad actors to carry out their malicious activities. This could result in grave implications for businesses too and hence, calls for extra scrutiny on the part of organizations to safely integrate crypto payments in the system.
5. Legal Challenges
It is important to note that many big countries in the world with tremendous business potential, including India and China, are yet to declare Bitcoin a legal tender. In other words, the use of Bitcoin and other digital currencies is still illegal in these countries. Until these nations declare digital coins a part of their financial ecosystem, these markets will remain out of the reach for the companies.
Conclusion
Despite the above-mentioned challenges, it makes sense for businesses to adopt digital coins as one of the legitimate payment methods in their business models. This will help companies to show off the global character of their enterprise while offering consumers one more method to pay for their purchases. In sum, adopting cryptocurrencies requires a comprehensive investigation, and only after thorough deliberations, a decision in this regard should be taken by companies and business organizations.
