- About 2,300 businesses in the US accepted bitcoin as a form of payment in 2020.
- Business platforms such as Shopify allow customers to pay with cryptocurrencies.
- Here are ways entrepreneurs can start accepting crypto payments and what to know ahead of time.
About 2,300 businesses in the US accepted bitcoin as a form of payment in 2020, according to a survey from the small-business financial site Fundera. However, there are nearly 10,000 different cryptocurrencies that entrepreneurs and customers can use today.
Accepting cryptocurrencies as a business owner not only provides your customers with another mode of payment but also shows you’re technologically savvy. What’s more, e-commerce platform Shopify recently partnered with the cryptocurrency processor Coinbase to allow crypto payments through its Commerce feature.
But it’s not too late for smaller business owners to jump on the trend, said Paul Glantz, the founder of the tax and accounting service Launch Consulting Group, which has been accepting crypto since its launch in 2016.
Glantz outlined how entrepreneurs can start accepting cryptocurrencies as payment and what that strategy could do for their businesses.
1. Find a crypto processor to accept payments
First, entrepreneurs should create a crypto wallet, which is a software program or physical device that stores, sends, and receives crypto. The next step is setting up an account on a crypto processing platform like BitPay or Coinbase Commerce, which allows merchants and e-commerce platforms to accept crypto payments.
BitPay can be downloaded as a third-party plug-in on an internet browser, while Coinbase Commerce allows for payment buttons to be embedded on a site, so when customers go to checkout they see crypto as an option alongside credit and debit cards, Glantz said.
But some business owners might prefer to accept cryptocurrencies directly to their digital wallets.
2. Set up an exchange account to convert the digital asset
Entrepreneurs also need to make sure there is a way to access the dollar value of their digital assets, Glantz said. Exchanging crypto for dollars is how a merchant maintains overhead costs that cannot be paid for in digital assets, such as rent and the payroll, he said.
For that, business owners will need to set up an account on an exchange platform, which facilitates the trading of cryptocurrencies for other assets like different cryptocurrencies or US dollars.
Some crypto processing systems have exchange processing built in, so business owners can select a percentage of the currency to convert to dollars. But wallet-to-wallet transactions — in which a consumer sends an asset directly to an entrepreneur’s crypto wallet — don’t automatically convert into dollars.
The entrepreneur can accept payment and exchange it for USDC, which is a stablecoin that’s pegged to the US dollar, Glantz said. Stablecoins are designed to reduce the volatility relative to cryptocurrencies that aren’t pegged to stable assets. Many people use that coin as a “safe haven” for crypto transactions as it’s widely accepted, he said.
3. Remember to tell the IRS
Business owners and solopreneurs will see a question about whether they accepted virtual currency on their tax returns. If these transactions are not properly reported, they could face penalties or criminal charges. In fact, David Canedo, a certified public accountant and tax specialist product manager at the crypto-tax-software company Accointing, told CNBC that not reporting these assets could be considered tax evasion or fraud.
These currencies attract a capital-gains tax — a levy on the profit gained from investing in an asset — when they are exchanged, cashed out, sold for profit, or used for purchase.
4. Understand the risk
Business owners should be aware of the crypto market’s high volatility and fluctuations. For example, in January, more than $1.4 trillion was wiped from the aggregate crypto market’s value.
There’s also a risk on the consumer end because cryptocurrency is not subject to chargeback, meaning a customer can’t always get their asset back if they ask for a refund from the business, Glantz said.
“As this technology is more widely adopted, there will be a lot more solutions to some of these things,” Glantz said. “But it’s still not too late to embrace it, get involved, and learn about it.”