Updated: May 5, 2020
Many small business owners have considered the option of accepting cryptocurrencies for their business at some point or another. Over the years we’ve seen larger companies such as Microsoft, Overstock, Newegg, Expedia and many more gradually offer bitcoin and other cryptocurrency payment options to their customers. There are more than 5000 existing bitcoin atms and over 1600 different crypto currencies available to trade on over 200 exchanges world wide that operate 24/7. Governments have experimented with national cryptocurrencies, and Facebook has plans to launch its own cryptocurrency called ‘Libra’. The utility of blockchain technology is indisputable, but these national and corporate cryptocurrencies are centralized while cryptocurrencies such as Bitcoin, Litecoin, and Ether are decentralized. It’s safe to say at this point that cryptocurrencies and blockchain technology will be part of our future.
If you haven’t taken the time to understand how the blockchain works, don’t worry it’s really not necessary. In fact, it is much less complicated (and more transparent) than the central banking system behind the national currency we have been used to for the past century. If your skeptical, the code is open sourced and there are endless resources (some of which I will link below) if you want to learn more about the technical side, but the most interesting thing about Bitcoin is it’s utility.
‘It’s too complicated!’
Back in 2009 it would have been very complicated to start accepting bitcoin payments for your business, but today it’s no more complicated than accepting PayPal, Visa or even cash! There are several bitcoin payment processing providers as well as exchanges that offer this service. Like other payment processing companies there are associated fees but they are generally lower than ‘traditional’ payment processors. These are a great option if your interested in accepting it and not as interested in learning about it. These bitcoin payment processing providers can hold your funds in bitcoin, convert it to your national currency or both depending on your preference. Like PayPal or Visa, the funds can be directly deposited into your bank account. But even this is not necessary for accepting bitcoin payments, you have the option of downloading a bitcoin wallet app on your android, iphone, or desktop and you can receive bitcoin payments instantly by providing a QR code or an address from your wallet to your customers! This option is best for those who either want to hold bitcoin instead of dollars or those who want control over the price and time they exchange their bitcoin.
'It’s too Risky!'
Most people hear about Bitcoin when it makes the news. Usually it has to do with it’s wild price fluctuations, either people are getting rich and buying 'Lambos' or losing everything! Most of this news is sensationalist but it is true that Bitcoin is volatile and completely unpredictable. Most small businesses cannot afford to take on any more risk. This is another reason why so many find bitcoin payment processing providers so useful. If risk is a concern, they can convert your bitcoin payments into dollars once you receive them, this lowers risk considerably and makes bitcoin and other cryptocurrencies a viable payment option for those who can’t take on any more risk.
“This complicates my bookkeeping!”
At first glance it seems like accepting bitcoin payments might be a bookkeeping nightmare, along with whatever tax implications on any gains/losses! Maybe it’s just not worth it? Accepting bitcoin is no different than accepting payments in any other currency. So if it’s worth it for you to accept USD or EUR, then it might be worth it for you to accept cryptocurrencies too. When you report your sales, you have to convert those currencies to your home currency at the exchange rate you were given, just the same way you would with cryptocurrencies. The process is exactly the same!
“What if I hold the bitcoin and gain/lose”
If you collect bitcoin payments for your sales you must report the equivalent amount in your home currency. If you use a Bitcoin payment processor and there is a gain or loss on the exchange this is considered a debit or credit to your expenses, the same way it is with foreign currencies. If you decide to hold the bitcoin and it changes in value, this is considered capital gains or loss. In Canada only 50% of your capital gains is subject to tax. This would be taxed at a different rate than revenue from sales.
‘Who uses cryptocurrencies?’
In the beginning it was mainly computer programmers, techies, or ‘cypherpunks’, (activists who advocated cryptography and privacy-enhancing technologies for social and political change) who used Bitcoin. It is rumored that the mysterious creator ‘Satoshi Nakamoto’ is made up of a group of these cypherpunks, but to this day the original creator is still unknown. The idea of ‘programmable’ money, that can’t be manipulated by banks or governments became fascinating to those in finance, especially free market advocates, but today it’s used by people of all walks of life. Chances are that some of your customers might already be using cryptocurrencies!
Advocates of Bitcoin and other cryptocurrencies have a strong sense of community. They promote businesses that accept bitcoin and for some people doing business with you might depend on whether you accept bitcoin. When you start accepting cryptocurrencies you are added to a directory of all business that accept bitcoin. This presents an opportunity for small business to attract more customers.
It`s clear that cryptocurrencies will be a part of our future. They will impact how we do business and transact. It seems an inevitable, whether it be with centralized cryptocurrencies such as Facebooks Libra, or decentralized cryptocurrencies of the people, like bitcoin. Regardless of which you prefer they will part of the future, and at some point, your business will have to adapt. My favorite Bitcoin advocate Andreas Antonopoulos, says that the best way to learn about bitcoin is to experience it. You can buy as little as 2.00 in bitcoin on most exchanges. Download a free bitcoin wallet and buy a very small amount. Practice sending and receiving small amounts with friends and family.
Bitcoin Wallets: https://bitcoin.org/en/choose-your-wallet
Bitcoin Payment Processors:
Informational videos and talks:
What is Bitcoin? https://www.youtube.com/watch?v=Gc2en3nHxA4
Andreas Antonopoulos – Wired https://www.youtube.com/watch?v=A6kJfvuNqtg