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Should You Go Crypto?


Jan 29, 2018 | Stephen Jackson

Over the past few years, cryptocurrency has crawled from the annals of the dark web and fringe tech circles and landed squarely in the mainstream zeitgeist of our times. But if you are running a small business, is it smart to start accepting digital assets such as Bitcoin or Ethereum?

If you’re only just now hearing about cryptocurrency, it’s likely a result of Bitcoin’s meteoric rise last month and subsequent pitfall in early 2018. At its December peak, a single Bitcoin was worth almost $20K, only to tumble to about $10K a few weeks later.

This is remarkable given that a guy bought 5,000 of them for $27 back in 2009.

But let’s not get too into the weeds here. Cryptocurrency is a very complicated form of digital assets, and there are tons of sources to read or watch online so it’s probably best to put yourself in the driver’s seat and get familiar with it before reading on.

Also, I in no way claim to be an expert in this subject, and this time we are talking about potentially serious money, not office kitchen nightmares. However, I was able to catch up with Lauren Slade, co-founder of the decentralized and crypto-powered e-commerce platform Swarm City, and she was able to school me a bit.

Either way, please take the following (very general) musings on whether or not Bitcoin is good for your small business with a grain of digitally encrypted salt.

A Few Things to Consider

The first thing you’ll need to do in order to accept or make payments using cryptocurrency is get yourself a cryptocurrency wallet, which is a piece of software that allows you to store your “keys” (pieces of cryptographic information which allow you to access your Bitcoin). Again, if you’re confused, you’re not alone. You can read up a bit on these here.

Once that’s established, you can begin accepting a variety of cryptocurrencies as payment for goods and services, or to pay contractors or employees. However, there’s a few caveats you should be aware of.

“If you are an American citizen and you are getting paid, you have to report how much the USD value of the cryptocurrency was at the time of the transaction,” Slade says. This means that you will be paying taxes on that value, regardless of whether or not it decreases in worth. However, Slade also points out that if you are operating as a business, you can report some of the decrease as a loss at the end of the year.

Either way, you need to record the exact worth of each transaction as it happens which, depending on the scope of your sales, can result in a major accounting headache in April. You can learn a bit more about some tax considerations surrounding cryptocurrency here.

This also points to the larger drawback of accepting something like Bitcoin. “Since it is such a volatile market, the price can go down,” Slade says. This means that the value of the currency used to pay for something can ultimate be less than what you initially spent to offer it, depending on when you decided to cash it out. “However, as volatile as it is, it will also likely go back up,” she adds.

One tip Slade offers to help hedge this bet is to only accept a predetermined percentage of your sales in crypto. “If you’re a small mom-and-pop shop, only accept 10 percent of your sales in Bitcoin. That’s it. Then you’ll have a cushion to grow,” Slade says.

Going for the Digital Gold

After reading these considerations, you can probably see the obvious upside to accepting cryptocurrency: While you might risk selling products at a loss, there’s also the chance that you might make a larger profit if the Bitcoin you accepted soars in value and you cash it out at just the right time.

“Without saying ‘we’re going to the moon,’ you can look at the trajectory of Bitcoin and see that more and more currency is moving into crypto,” Slade says. Of course, like any investment it’s risky, and cryptocurrency by many metrics appears incredibly so. However, if you were to take a certain slice of your sales that you’d be comfortably willing to lose and hold it in Bitcoin, well, you just might end up like this guy.

Another point that Slade brings up is that whenever you buy Bitcoin on a popular site such as Coinbase you end up shelling out fees. However, if you accept it as payment at your business, you avoid paying extra for that transaction.

Lastly, cryptocurrency might be a boon for small businesses making sales outside the U.S. “When you accept Bitcoin, you are accepting a global currency,” Slade says. “Bitcoin is a borderless, digital form of cash. It makes sense to accept Bitcoin if you are operating on a global scale.”

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