For those new to crypto, one of the first questions that come up is: but what can I do with crypto? Today’s answer is, just about anything. You can buy a car, bedsheets, video games, plane tickets, and even convert it back to fiat currency (but be aware of the tax consequences of doing so!).
This was not always the landscape for crypto. A few years ago, there were very few companies that would accept crypto as a payment method. The financial infrastructure necessary to make it a logistically sound option for businesses hadn’t been developed yet. But a lot has changed in recent years.
At the time of writing this article, we have giants like Tesla, Microsoft, and AT&T that accept crypto and countless more small businesses that have decided to take crypto as a payment option.
Now the question to ask is, should YOU accept crypto? This article gives an overview of whether crypto is suitable for you or not.
Pros and Cons of Accepting Crypto
It’s important to remember that crypto is still new technology. As such, it’s fascinating to see updates, developments, and breakthroughs reasonably often. But since it is so unique, there are still several unanswered questions about how the technology will impact how you do business.
To give you a complete landscape of the cryptocurrency panorama, here’s a list of pros and cons for you to consider in your crypto-adoption path.
Pros of accepting crypto
- The coolness factor: At this point and time, accepting crypto impacts how your brand is perceived. Cryptocurrency early adopters are still a relatively small community, and getting crypto as a payment option will make you visible to them.
- Security: Due to the nature of blockchain technology upon which crypto uses, the transactions made with it are inherently secure. Using crypto can minimize the risk of fraudulent transactions and other chargeback scams.
- You can make financial gains: Rapper 50Cent famously started accepting bitcoin when he released an album in 2014. Back then, each bitcoin was worth around $675. At the time of writing this article, bitcoin is valued around US$55,000 per 1 bitcoin. According to reports, he earned about 700 bitcoin from album sales. Whether he would HODL (a popular term in crypto, that basically means to “hold” onto your coins/tokens) the coins or not is unknown, everyone can agree it was a good financial move for him.
Cons of accepting crypto
- It adds another element to keep track of to your financials: If you are entirely new to the crypto world, it will be necessary for you to invest some time into educating yourself on how crypto works. You’ll want to be particularly mindful of your tax obligations. Likewise, you need to explore the best path to add it as a payment option for your business.
- Not everyone gets it yet: If you decide to start accepting crypto, you’ll be one of the early adopters. Crypto is still new as a financial tool, and there may not be many adopters yet in your specific market.
- High volatility: Volatility has the upside of opening up the possibility of your crypto dramatically growing in value. However, the possibility of your crypto considerably losing weight is real too. You need to make sure that you understand the potential impact of a dramatic decrease in coin value on your business.
Things to Consider
Here are some additional considerations if you are thinking about accepting crypto. These are neither pros or cons, but rather just the way things work in the crypto space at the moment.
Consider HODLing your crypto
The people and institutions who have made the most significant gains have been successful because they hold on to their crypto for long periods. That is why the HODL acronym is popular amongst crypto adopters. HODL stands for hold on for dear life because due to the volatile nature of crypto, many have gotten out and missed out on significant capital gains. Whatever strategy you choose, it’s essential to think of crypto as a long-term investment rather than a way to make quick financial games.
It’s more work
Figuring out how much your crypto is worth, converting it to fiat currency, calculating your tax obligations, and exchanging one coin for another are just some of the extra tasks that you will have to take on if you start accepting crypto. In a nutshell, it’s more work. So if you don’t have the bandwidth at the moment, you should make the necessary adjustments so that you can onboard the work involved in the implementation and management of your crypto assets.
It opens up the possibilities of blockchain for your business
Using crypto as currency is only the tip of the iceberg when it comes to blockchain technology. There are myriad other aspects of it that you can take advantage of, such as DeFi, smart contracts, lower transaction fees, and so on.
Since you’ll be invested in crypto, exploring these other avenues can help you make the most out of this strategic move.
Tax and Accounting Implications
Crypto is taxable, and the laws around how crypto taxation works are new. This means that there are still plenty of gray areas regarding how the IRS views crypto. Most of the confusion comes from the fact that the IRS catalogs cryptocurrency as a financial asset like stock and not as currency.
Here are three aspects to look into when it comes to crypto accounting:
- Hire crypto accounting experts: Crypto is still relatively new, so finding knowledgeable and experienced accounting firms can be challenging. However, you choose to work with them to make sure they have the experience to advise you correctly to avoid any rough encounters with the IRS.
- Integration into your current accounting: Adding crypto assets to your recent financials requires you to know the best way to implement them into your books. This may cause you to invest in additional solutions or work with someone to help you with it.
- Extra accounting work: Since crypto is treated as an asset, similar to stock, keeping track of gains and losses is a big part of the extra work involved in crypto accounting.
Work with Crypto Accounting Professionals
Being an early adopter of crypto has the potential to transform your business for the better. We’re only just starting to see what’s possible with this new financial technology, and the future seems bright.
However, if you want to see that future, your tax obligations must be met. This makes crypto-asset tracking and accounting an absolute necessity if your business is going down this path.
If you’re ready to take your business in the crypto direction, book a free consultation, with Founder’s CPA, to speak with one of our crypto experts.