Big businesses and financial service firms are making moves in the cryptocurrency space. Tesla accepted Bitcoin for payment until it recently reversed its decision for alleged environmental concerns. PayPal allows its U.S. users to buy, sell, hold and check out with select cryptocurrencies (Bitcoin, Ethereum, Litecoin and Bitcoin Cash). Mastercard and Visa made announcements that they would start supporting select cryptos. MoneyGram has teamed up with CoinMe, which lets people buy crypto with cash or withdraw it from MoneyGram’s brick-and-mortar locations.
With the recent IPO of Coinbase and the ready availability of crypto exchanges, crypto processors (GoCoin) and crypto POS (AnyPay), we expect that more small businesses in New Jersey will begin accepting cryptos as payment, in order to take advantage of the following immediate benefits:
- Payments are direct between business and buyer, significantly reducing or eliminating fees charged by banks and payment processors. Many crypto networks currently charge less than 1%.
- Payments in crypto are irreversible so businesses avoid the risk of chargebacks.
Businesses in the cannabis space will have additional benefits from accepting crypto payments, and avoiding problems that cannabis businesses usually face working with banks and payment processors. By accepting payments in crypto, cannabis businesses can avoid the risk of having their bank accounts being shut down at a moment’s notice or being banned by a payment processor. Cryptocurrency offers many cannabis businesses an alternative to dealing mainly in cash. In states like New Jersey and New York where recreational cannabis recently became legal, accepting cryptocurrencies should be at the forefront of concern.
However, accepting cryptocurrency comes with risks and other issues as follows:
- Cryptos are subject to high price volatility. If a crypto crashes before it can be converted into fiat currency (USD), the business can suffer a serious loss. This risk can be avoided by accepting only fiat-backed “stablecoins” – crypto coins backed by fiat currencies – such as USD Coin (USDC), Gemini Dollar (GUSD) or Paxos Standard Token (PAX).
- Cryptos are considered property, not currency, so any increase in value would be considered capital gains. Businesses accepting crypto should prepare to track all crypto transactions and changes in value, significantly increasing record keeping.
- Business owners will need to learn about cryptocurrencies, which tokens they want to accept, converting cryptos into cash, crypto exchanges and wallets, applicable fees and so on.
The time appears ripe for increased consumer adoption and use of cryptocurrencies. Small business owners should get ahead of the curve and prepare for the oncoming crypto-using masses.