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More and more small businesses are accepting cryptocurrency as a payment method. There are several nuances that need to be taken into account by a business planning to introduce this at home.
Bitcoin is the most popular cryptocurrency.
Cryptocurrency is a decentralized digital currency that can be used to buy goods and services. Like stocks, it can lose or gain value. There is no single approach to the regulation of digital currencies in the world. Japan, France, Germany recognized virtual currencies as a means of payment. In China, the mining and trading of cryptocurrency is illegal, but there is no punishment for possessing it. The Indian government plans to ban digital currency trading. But Belarus has adopted comprehensive legislation and fully legalized the cryptocurrency sphere.
There is no direct ban on crypto transactions, although the legal status has not yet been determined. The corresponding bill has passed only the first reading so far. One way or another, and virtual currency has already penetrated our reality. For example, in Ukraine, digital currency can be used to pay in online clothing and equipment stores, pay for legal, travel, real estate services, and hotel accommodation.
Benefits and risks of virtual currency for business
In connection with the pandemic, many companies have relied on cryptocurrency, in particular bitcoin, as a safe haven amid economic uncertainty. It, like most other digital currencies, is immune from inflation, because its supply is fixed and governments cannot manipulate the value.
In addition, the use of bitcoin opens up opportunities for cost savings. So, in the operation of processing payments on credit cards, not only the seller and the company that issues the cards are involved, but also many other intermediaries. They charge a certain fee. Typically, there is a 3% charge for processing credit cards for businesses, but it can be as high as 5%. The payment in cryptocurrency is sent directly from the sender to the recipient, which makes it possible to reduce the commission to 1%, and sometimes to zero.
Bitcoin transactions involve risk.
At the same time, the option of paying for goods and services with cryptocurrency allows expanding the client base at the expense of foreign buyers.
Despite a number of advantages, the use of virtual currency in business also has disadvantages. Added to the legislative unsettledness is extreme volatility. For example, according to Coindesk, on February 22, Bitcoin cost $ 57 thousand, and on March 1 - $ 46 thousand. Therefore, the use of digital currency is associated with risk.
As such, there are a few things to consider for companies that decide to accept Bitcoin as payment.
1. You need to have a bitcoin wallet
A Bitcoin wallet allows you to buy, store and sell cryptocurrency. It has a bitcoin-like email address that customers can use to send their payments. To make a payment, the buyer must enter the recipient's bitcoin address, scan his QR code, and then send the required amount.
The owner of a bitcoin wallet will be able to access the cryptocurrency using a key or a secret number. You can also purchase a "hardware wallet" that stores the key on your hard drive for increased security. Bitcoin.org has a useful tool to help you choose the wallet that works best for your business.
You can choose a bitcoin wallet specifically for your business.
2. Refunds
The reverse operations can only be performed by the party that receives the funds. Businesses accepting bitcoins should be prepared to demand a refund. Therefore, the business should keep track of how much money each customer paid.
3. Taxes
In 2014, the U.S. Internal Revenue Service (IRS) made a key decision regarding virtual currency. According to it, companies that choose to accept Bitcoin or any other cryptocurrency must report it as gross income based on its fair market value at the time of receipt. Therefore, businesses that sell their bitcoin need to track its value on the day it was received and the day it was sold.
In countries with an uncertain legal status of digital currencies, taxation of proceeds received in bitcoins is difficult. Therefore, Ukrainian entrepreneurs, as a rule, place the bitcoins received from a client for exchange on one of the electronic platforms, and then transfer the income to their account in hryvnia or in another currency.
Bitcoin can rise in price and fall in price.
Thus, cryptocurrency is part of the regular income and should be taxed at the regular income tax rate. In addition, companies that do not want to risk their money due to the volatility of virtual money should convert bitcoins to fiat currencies. For example, Coinbase can be used as a standard exchange that will allow you to exchange cryptocurrencies within 2-3 days.
4. Buyer
The impressive volatility is driving many people to accumulate cryptocurrency. For example, if you bought $ 100 worth of bitcoins in 2014, today the investment would have grown to $ 12,000. Therefore, some refrain from spending virtual currency on small purchases. Thus, a business may have problems finding a sufficient number of clients interested in crypto payments.
Ali Hamam, vice president of Tahini's Mediterranean Cuisine in Ontario, says 95% of customers have never even heard of Bitcoin. However, do not discount the fact that supporters of innovation will appreciate your loyalty to the cryptocurrency. After all, Bitcoin users usually support a community of like-minded people. So don't forget to advertise that you accept Bitcoin.
Bitcoin is the most popular cryptocurrency.
Cryptocurrency is a decentralized digital currency that can be used to buy goods and services. Like stocks, it can lose or gain value. There is no single approach to the regulation of digital currencies in the world. Japan, France, Germany recognized virtual currencies as a means of payment. In China, the mining and trading of cryptocurrency is illegal, but there is no punishment for possessing it. The Indian government plans to ban digital currency trading. But Belarus has adopted comprehensive legislation and fully legalized the cryptocurrency sphere.
There is no direct ban on crypto transactions, although the legal status has not yet been determined. The corresponding bill has passed only the first reading so far. One way or another, and virtual currency has already penetrated our reality. For example, in Ukraine, digital currency can be used to pay in online clothing and equipment stores, pay for legal, travel, real estate services, and hotel accommodation.
Benefits and risks of virtual currency for business
In connection with the pandemic, many companies have relied on cryptocurrency, in particular bitcoin, as a safe haven amid economic uncertainty. It, like most other digital currencies, is immune from inflation, because its supply is fixed and governments cannot manipulate the value.
In addition, the use of bitcoin opens up opportunities for cost savings. So, in the operation of processing payments on credit cards, not only the seller and the company that issues the cards are involved, but also many other intermediaries. They charge a certain fee. Typically, there is a 3% charge for processing credit cards for businesses, but it can be as high as 5%. The payment in cryptocurrency is sent directly from the sender to the recipient, which makes it possible to reduce the commission to 1%, and sometimes to zero.
Bitcoin transactions involve risk.
At the same time, the option of paying for goods and services with cryptocurrency allows expanding the client base at the expense of foreign buyers.
Despite a number of advantages, the use of virtual currency in business also has disadvantages. Added to the legislative unsettledness is extreme volatility. For example, according to Coindesk, on February 22, Bitcoin cost $ 57 thousand, and on March 1 - $ 46 thousand. Therefore, the use of digital currency is associated with risk.
As such, there are a few things to consider for companies that decide to accept Bitcoin as payment.
1. You need to have a bitcoin wallet
A Bitcoin wallet allows you to buy, store and sell cryptocurrency. It has a bitcoin-like email address that customers can use to send their payments. To make a payment, the buyer must enter the recipient's bitcoin address, scan his QR code, and then send the required amount.
The owner of a bitcoin wallet will be able to access the cryptocurrency using a key or a secret number. You can also purchase a "hardware wallet" that stores the key on your hard drive for increased security. Bitcoin.org has a useful tool to help you choose the wallet that works best for your business.
You can choose a bitcoin wallet specifically for your business.
2. Refunds
The reverse operations can only be performed by the party that receives the funds. Businesses accepting bitcoins should be prepared to demand a refund. Therefore, the business should keep track of how much money each customer paid.
3. Taxes
In 2014, the U.S. Internal Revenue Service (IRS) made a key decision regarding virtual currency. According to it, companies that choose to accept Bitcoin or any other cryptocurrency must report it as gross income based on its fair market value at the time of receipt. Therefore, businesses that sell their bitcoin need to track its value on the day it was received and the day it was sold.
In countries with an uncertain legal status of digital currencies, taxation of proceeds received in bitcoins is difficult. Therefore, Ukrainian entrepreneurs, as a rule, place the bitcoins received from a client for exchange on one of the electronic platforms, and then transfer the income to their account in hryvnia or in another currency.
Bitcoin can rise in price and fall in price.
Thus, cryptocurrency is part of the regular income and should be taxed at the regular income tax rate. In addition, companies that do not want to risk their money due to the volatility of virtual money should convert bitcoins to fiat currencies. For example, Coinbase can be used as a standard exchange that will allow you to exchange cryptocurrencies within 2-3 days.
4. Buyer
The impressive volatility is driving many people to accumulate cryptocurrency. For example, if you bought $ 100 worth of bitcoins in 2014, today the investment would have grown to $ 12,000. Therefore, some refrain from spending virtual currency on small purchases. Thus, a business may have problems finding a sufficient number of clients interested in crypto payments.
Ali Hamam, vice president of Tahini's Mediterranean Cuisine in Ontario, says 95% of customers have never even heard of Bitcoin. However, do not discount the fact that supporters of innovation will appreciate your loyalty to the cryptocurrency. After all, Bitcoin users usually support a community of like-minded people. So don't forget to advertise that you accept Bitcoin.
