In the past decade, Bitcoin, the most famous of the various cryptocurrencies that exist in the digital sphere, has gone from something primarily used by hackers terrorists, and libertarian white techies to a viable currency that is beginning to gain acceptance at online retailers like Overstock, Newegg, and WordPress.
Many small businesses have begun to accept Bitcoin as payment. If your small or medium sized business is thinking about accepting digital currency, here are some key points to know.
Altcoins Can Help Your Company Go Global
If you deal with a lot of international suppliers or companies, dealing in Bitcoin or another digital currency can help you avoid all sorts of exchange fees. Many Bitcoin investors are overseas, and are very interested in building the concept into a broadly accepted currency.
Ahead Of The Competition
Most people agree that a globally accepted digital currency is just a matter of time. Bitcoin in particular has technical aspects that would need to be solved before it could be widely used or universally accepted, but other cryptocurrencies are rising that are more stable and less frustrating.
Accepting alternative currencies, especially if competitors don’t, can give a business a leg up in their market segment.
Less Prone to Fraud
Although Bitcoins are entirely digital, and exchanges and investments are prone to scams, the currency itself is somewhat fraud-proof. According to Graeme Conradie, the CEO of Digital Nomad, the coins are similar to a cash transaction occurring in the digital sphere; once the transaction is made, the customer can’t try to reverse it due to poor service or disliking the final product.
For businesses that have a great deal of issues with credit card payments being disputed, this could be a huge benefit.
Benefits For Anonymous Purchases
If a company sells products where the purchasers would rather stay anonymous, from adult items to medical procedures and more, Bitcoin can be an invaluable option to offer. Bitcoin does not track information by email or any demographics.
This is why the currency is so often used by those who are engaged in illegal activities, but it is also appealing to those who feel that they are already too carefully tracked by government and other agencies.
Cryptocurrency is volatile
For investors, the day to day fluctuations of Bitcoin and other altcoins may not be particularly relevant, especially if they plan to remain invested for some time yet. For businesses, however, the way a single coin can be worth different amounts day to day makes it difficult to know what to charge for services and how to count earnings. This gets especially complicated if a company is trying to make payments in bitcoins.
Lack of Regulation
Although some governments are stepping in and looking for ways to better regulate cryptocurrencies—Russia and China are two recent, well-reported examples, the financial sector remains specialized in dealing with fiat currencies, those backed by the community’s good faith in a nation-state. Countries often feel that the laws must be rewritten in order to include digital alternative currencies, which is a time-consuming process.
This leaves many businesses feeling a bit like they’re in the Wild West of financial possibilities when they start dealing with Bitcoins, and they’re not entirely wrong. Yet, it’s crucial to remember that while cryptocurrencies offer a plethora of advantages, the online information landscape is ever-changing, requiring businesses to stay updated on regulatory shifts and technological advancements. It is important to remember that the currency is still very new, and is often still treated like a commodity rather than a currency by those who own it. This dramatically changes how it is reported on taxes, how it is used as payments, and more.
None of this is directly against a business choosing to accept Bitcoins, just a statement that companies need to remain abreast of any legal changes associated with the technology.
Faster, Less Expensive Transactions
Merchants accepting payments in Bitcoin get paid more quickly than they do through credit card transactions. There are also smaller to no fees associated with accepting a payment from a Bitcoin user. (Exchanging those Bitcoins into a local fiat currency is a very different situation, however.)
If a company needs to get its payments very quickly, accepting Bitcoins may be a very viable solution, especially if it can then use those coins with its suppliers, so that they do not have to be transferred into dollars.
Taxes Become More Complicated
Before your business makes the decision to accept Bitcoin or another altcoin, it is crucial that you speak to your financial advisor or accountant.
Accepting the currency can be a very complicated tax issue; under some tax laws, for example, Bitcoin is considered an investment, and every single transaction that occurs can be a capital gain or loss. So know what you’re getting into, tax wise, before you move to accept this method of payment.