Special to the Financial Independence Hub
Considering accepting cryptocurrencies for payment? Here’s what you need to know.
Let’s face it. The use of cryptocurrencies in business is swiftly gaining ground, yet many business owners are at a crossroads on whether to implement them. Before you decide to accept cryptocurrencies, you need to know the benefits and risks.
Remember that if you need budgetary support to manage the transition, you can explore financing options like microloans.
What are Cryptocurrencies, and how do they work?
Cryptocurrency is a virtual currency that any central government does not regulate. Instead, it is supported by blockchain technology.
Blockchain technology refers to creating a shared ledger that cannot be manipulated. The technology uses sophisticated computer algorithms to record and track transactions and assets within a network.
The most popular cryptocurrency is Bitcoin, launched in 2009.
Cryptocurrencies are used;
- As a means of exchange for goods and services
- As digital assets that store value.
Pros and Risks of using Cryptocurrencies In your Business
● Greater Acceptability
More businesses, particularly global corporates like Amazon and PayPal, accept payments by digital currencies and have greater adoption of cryptocurrencies.
Moreover, more people are aware of cryptocurrencies and how they work.
● Superior Payment Security
Initial misgivings regarding the security of cryptocurrencies slowed down its adoption. However, cryptocurrency transactions offer enhanced protection superior to that credit cards.
Credit card payments require third-party verification, which makes them prone to fraudsters. On the other hand, cryptocurrency transactions do not require centralized proof but use sophisticated computer algorithms, making it nearly impossible to steal personal information.
● Lower Transaction Costs
Cryptocurrencies are way cheaper when compared with banks and digital payment platforms such as PayPal.
Cryptocurrencies charge a near-nil to no charge for transactions.
What’s more, cryptocurrencies are convenient for settling international payments in about 10 minutes. This facilitates international payments from your customers abroad.
● Customer Acquisition Strategy
Cryptocurrency as a payment option is cheaper and more appealing to the tech-savvy younger generation.
Compared with government-issued currencies, cryptocurrencies fluctuate in price widely.
The volatility can challenge businesses with substantive amounts of crypto in their reserves. For that reason, companies that trade in crypto often convert cryptocurrencies into fiat money to mitigate against the risk.
● Tax Implications Of Cryptocurrencies
For taxation purposes, The IRS treats cryptocurrencies as property.
This triggers a bigger problem as businesses need to keep track of the values of cryptocurrencies held until they are disposed of. If you deal with numerous transactions, that can be an overwhelming task.
● Rigorous Record Keeping In Processing Refunds
Cryptocurrency transactions are irreversible. That’s a good thing for the seller as you’re assured of payment.
However, if you need to refund customers for transactions, you will have to keep a detailed record to process refunds accurately.
● An Uncertain Regulatory Environment
Although there is growing acceptance of cryptocurrencies, the regulatory environment is still developing globally.
How to start accepting Cryptocurrencies as Payment
Adopting cryptocurrencies as a means of payment requires meticulous planning for a company. You may need to train staff and acquire the necessary information technology to handle these transactions effectively.
Note that you can approach fintech lenders for microloans if you need financial help to implement these changes.
You may opt to work with a payment firm or receive payments directly (peer-to-peer) to accept crypto payments.
If you choose to receive the payments directly from clients, the process may look like this:
- Issue the customer a QR code to pay with cryptocurrency.
- Present the customer with your crypto payment address details where they will send their payment.
- The customer will complete the payment by entering their private key to authorize the transaction.
- Using sophisticated computer algorithms, the transaction is verified and appended to a public ledger, a blockchain.
- You receive payments
Tips for Businesses considering implementing Cryptocurrencies
- Decide if you will work with third parties to handle your payments, or you’ll go it alone.
- Identify the cryptocurrencies that you’re willing to accept.
- Plan to deal with emerging issues of refund and taxation.
- Adopt a cash-conversion strategy
You may need to hire bookkeeping experts to handle taxation issues effectively. If you require extra funding, then reach out for microloans from lenders.
Cryptocurrencies offer a secure and cost-effective way to receive payments from clients. Implementing cryptocurrencies may require that you train staff and search for the necessary technological tools. Reach out for microloans to enable you successfully implement cryptocurrency payments in your business.
Nonso Nwagbo has established a footprint in the fintech and blockchain industry as a crypto-cum-financial instrument trader and an ardent SEO content writer. His journey into the fintech industry dates back to his early days as a forex trader and he has since worked on various fintech project as a content strategist. When he’s not writing or trading, he’s definitely catching up with family and friends.