If you haven’t been living under the rock, you would know that cryptocurrency is the ultimate digital currency that everyone is interested in. It relies on encryption technology for the transiting of value. For instance, you would be aware of bitcoin and how it operates independently within a banking system. In many countries, cryptocurrency can be utilized for the exchange of value rather than cash.
The prime usage of cryptocurrency is the selling and purchasing of online services and products. Cryptocurrency has become a seamless way for small businesses to accept payments from customers and pay the vendors. Believe it or not, cryptocurrency is a new niche, and many businesses are still unaware. So, in this article, we are sharing all you need to know about cryptocurrency!
Cryptocurrency – What Is It?
The cryptocurrency is the combination or hybrid of the commodity and digital currency and helps store the value. The currency has been outlined with the exchange rates, but most of them have fixed supplies, making them somewhat similar to platinum and gold. For the utilization of cryptocurrency, the merchants and consumers need to open the wallet account.
These wallet accounts work like bank accounts that are specific to the cryptocurrency. Once you open the wallet, you can accept and purchase the cryptocurrency. For instance, the small businesses can purchase the cryptocurrency through the open exchanges on Bitpay and Coindesk, at the prescribed and stated exchange rates.
The cryptocurrency can be utilized for buying the products and services for the businesses that have the wallets for accepting the payments. These wallets are curated to convert the cryptocurrency into cash with which the users can cash out the cryptocurrency. However, one can always store the cryptocurrency.
First of all, the fiat money is developed by the government when they print out the currency, and the central bank is responsible for the regulation. With this being said, the currency that’s created by the government is seamlessly distributed through the treasury, and the central banking system will be responsible for tracing the currency, along with the management.
One needs to understand that the miners develop cryptocurrency while the algorithms use the computing power to decentralize the transactions through the blockchain. Also, the miners will mine the coins since there is no central entity responsible for the usage or the development of the currency.
Cryptocurrency & Small Businesses – The Influential Relationship
With the initial advent of cryptocurrency, small business owners are unsure how to use the cryptocurrency and how it can influence their business operations. That’s to say because there are positive as well as negative sides of this digital currency. As for now, huge-scale companies like Microsoft, Amazon, and Overstock are already accepting Bitcoins.
When it comes down to the positive sides of using the cryptocurrency for businesses, it promises a reasonably-priced and quick way of accepting the payments compared to the traditional payment methods, such as credit cards. Usually, the cryptocurrency transactions are always final. Above all, there will be no processing fee than PayPal and Stripe that charge 2% to 3% commission.
With the cryptocurrency, there will be no processing fee since there is no intermediary. Usually, there are decentralized ledgers, which means one doesn’t need to pay for the transactions. The cryptocurrency usually has the buy/sell spread while converting the digital currency to the base currency. Secondly, there is a high transaction speed with cryptocurrency.
That’s to say, because the cryptocurrency transactions are optimized on a near real-time basis. For instance, the miners will need around ten minutes for the facilitation and verification of the transactions between different wallets. This is a positive point because credit card transactions usually need two to three days to confirm the transaction.
Thirdly, the cryptocurrency promises the final transactions, which means the consumers cannot dispute the charge or negotiate the sale. With this being said, the merchants will have higher control over the return policies, and the risk of chargebacks will be removed. On top of everything, the payment options for customers are incrementing. Usually, there are five different payment types with cryptocurrency.
As far as the downsides of cryptocurrency are concerned, it has high price volatility, which can adversely influence small businesses. Fortunately, the wallets will promise seamless conversion of coins into cash on an automated basis. With this being said, the high price volatility will hugely influence the businesses that conduct businesses on the net terms.
The second adverse impact of cryptocurrency is the unregulated currency environment. This is because the sovereign governments and the central banks haven’t optimized the legislation. Hence there is no proper taxation paradigm. With this being said, there might be some uncertainty because the taxation standards might change with time.
Is Cryptocurrency Fine For Small Businesses?
When it comes down to deciding if the cryptocurrency should be opted by the small businesses or not, the cryptocurrency is a fine choice for the B2C business. In case you are a B2B business, it’s better to hold off the utilization of cryptocurrency. With the cryptocurrency, the B2B businesses will be paid in the digital currency, such as agencies, vendors, consultancies, and suppliers.
According to business experts, cryptocurrency is a fine choice for B2C businesses since it comes with free advertising, and the implementation will be easy. The low transaction fees and irreversibility are top-notch reasons why the cryptocurrency is a fine choice for small businesses. In the case of B2C businesses, the vendors and suppliers still prefer traditional payment modes.
Utilizing Cryptocurrency For Small Businesses
When you first want to start utilizing cryptocurrency as a small business, it’s pretty simple. In the first step, you need to set up the merchant wallet account, CoinGate, Coinbase, and BitPay. All of these wallets can be set up within a few minutes, and you can even customize the portals. Also, you can convert the cryptocurrency to the base currency and share money through ACH.
Once you set up the merchant wallet account, you will be provided with a unique wallet address in the form of a collection of numerical and alphabetical characters. Also, there will be an associated QR code and will be utilized for sending the cryptocurrency payments to the wallet. Also, you will receive the private key that can be utilized for accessing the wallet.
After this, you need to integrate the cryptocurrency option in the existing points of sale. You can utilize the POS system if you have the brick and mortar businesses; there will be QR codes for sending the coins, and the new transaction ID will be generated. On the other hand, there will be checkout pages, plugins, and APIs if your business has online shopping carts.
In case your business utilizes the digital or physical invoice, the cryptocurrency can be suitable for such businesses. This process is more efficient and effective for digital invoices since you only need to create a live link. Once this is done, all you need to do is integrate the transactions with the accounting software.
Tax Implications With Cryptocurrency
Whenever small businesses think about utilizing cryptocurrency for small businesses, they need to think about tax purposes. You might not believe it, but adhering to the country’s tax laws is easier than expected with cryptocurrency. With this being said, the revenues from cryptocurrency must be treated as cash transactions.
With this being said, most countries will have the documentation for the proper utilization of the cryptocurrency. Everything will be simplified since the merchant wallets can convert the cryptocurrency into cash on an automated basis. With this being said, the ACH payment can be categorized as revenue and might be curated in the gross revenue numbers.
As far as cryptocurrency sales are concerned, they are taxed at the company’s corporate structure’s regular tax rate. On the other hand, if the cryptocurrency is not converted properly, the taxation will become tedious.
Types of Cryptocurrency
This is the first peer-to-peer and decentralized digital currency that has hit the market. The currency was first introduced back in 2008 and was launched by Satoshi Nakamoto in 2009. The value of this currency will vary with the market cap, along with the per-coin value.
Ethereum might be the new crypto currency out there and has been named as the Turing complete currency. Many people wonder that this cryptocurrency works as Bitcoin as far as the value-transfer is concerned. The cryptocurrency will support applications on top of the value.
This cryptocurrency,litecoin, was basically designed for reducing the time it demands the miners to verify the transactions. For instance, Bitcoin might take around ten minutes for verification, while Litecoin will only take two minutes.
This is the coin designed with the CryptoNote protocol, which makes it different as compared to Bitcoin. With this being said, this currency promises better results with scalability, privacy, and decentralization. The launch was created as open-source software and was launched in 2014 for the first time.
This cryptocurrency is similar to Bitcoin when it comes down to privacy. With this being said, the transactions will be anonymous, but the people can still check the transaction amount and what was bought. So, it wouldn’t be wrong to say that Zcash is the most private option out there.
The Bottom Line
Small businesses must accept the cryptocurrency if they belong to the B2C business community, but it’s not suitable for B2B businesses. The bottom line is that these merchant wallets are easiest to integrate with the cryptocurrency payment metrics into the Point-of-Sales system.