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SHOULD YOU ACCEPT CRYPTOCURRENCY PAYMENTS

NEXT ARTICLE:TO OFFER OR NOT TO OFFER FINANCING?

In our article on the various forms of payment, we did not discuss cryptocurrencies. It is time to see if they are a payment option.

With all the online noise right now, both positive (reputable companies accepting cryptocurrencies payment) and negative (many people selling us the idea of getting rich with this currency), it is impossible to not be aware of cryptocurrencies.

But what are cryptocurrencies? It is a form of currency that can be shared from one person to another without the intervention of a central bank but requires other users to both validate transactions and create new currencies. Cryptocurrencies use information encryption technology (cryptography) and all operations are listed online (blockchain). The best-known options are Bitcoin, Ethereum, and Cardano, each offering a technological variant. To learn more, here are links to some great presentations on YouTube:

 

This form of payment is growing in popularity with some large companies accepting it (see the full list here):

  • - Microsoft
  • - Wikipedia
  • - CheapAir
  • - BMW
  • - Express VPN
  • - AT&T
  • - Shopify
  • - Rakuten

 

This past February, Tesla bought $ 1.5 billion worth of Bitcoin to offer this payment method to car buyers. Mr. Musk's opinion has since changed, sometimes in favor, sometimes against Bitcoin payments, mainly because of the amount of electricity the currency requires.

This information is not particularly important to our article, but the impact that his change of opinion had on the value of Bitcoin, yes. According to Yahoo Finance, the value of Bitcoin in US dollars will have increased from $ 17,108.00 in November 2020, to $ 61,243.00 on March 13, 2021, to currently stand at $ 37,486 ( see the current value).

And here is part of the problem. Few businesses can afford to have such a high level of volatility in managing their cash flow. Margins are generally lower in companies than the 350% change in values (from $ 17,108.00 to $ 61,243.00) in just a few months. Of course, companies don't ONLY offer to pay with cryptocurrency, but you have to be very solid even with a fraction of your cash at risk this way.

Another factor is the wide variety of options. Of course, the best known and the strongest is Bitcoin. However, there are said to be approximately 5,700 types of cryptocurrencies in existence, but around 30 are large enough to be considered (read). Which option to choose? And how to switch from one option to another? Some applications allow you to convert between different currencies like ShapeShift and Changelly. Of course, you must have a virtual "wallet" to deposit and receive cryptocurrency. There are things to learn, but nothing that should be a barrier to use.

There is also the whole fiscal aspect; how cryptocurrencies are viewed. They are not considered a currency in Canada, but rather a good. Which has tax implications on your purchases and sales. Revenu Québec speaks of exchange or barter rather than purchase or sale. An excellent article on the subject is written by Revenu Québec in French if you are from Quebec, this is for you. ( Read it here). Rules from country-to-country change, but the optics seem to be similar; we are not talking about money, but rather about goods.

One option seems to be looming on the horizon; the big online payments players are starting to offer using cryptocurrency. PayPal has a program in the United States called "Checkout With Crypto" which allows cryptocurrency holders to pay for their purchases through the platform (see). But, as far as I could see in my research (as of May 25, 2021), what is happening is that the cryptocurrency is being converted into the currency of your country. So, if you are from Canada, you will receive your payment in Canadian dollars, not Bitcoin or other cryptocurrencies. The online payment platform will do the conversion. In effect, the management of the cryptocurrency has passed to the intermediary company. So, it is easy for you, but you will not be a cryptocurrency holder.

The last point to consider is that of the bad reputation of cryptocurrencies. Although this technology is probably the future of online transactions, in the past it has been used to fund illegal activities, such as money laundering, selling/buying of illegal products, fraud, and more. Some players are working on options that would allow an identity to be attached to the transaction and thus make it more legitimate if you do not know your buyer. Read more.

For all these reasons, I believe that currently accepting cryptocurrency payments is not a good option for a small business. There are too many variables still needing to be normalized, such as having some value stability, having a clear checkout process, and having the identity of buyers.

Stéphane Elmaleh-Riel, B.Ed, MBA
Marketing consultant