Companies Are Accepting Cryptocurrencies as Payment and What this Means for the Industry
More companies are accepting cryptocurrencies as payment. Should your business do so too?
Technological advancement has seen mushrooming of many payment mediums. Cryptocurrency payments are the newest kid on the block. Thanks to ongoing innovations and revolutions in the financial industry, paying for services or goods has become much easier. Payments can now be done on air, rail, and road or anywhere on this planet. The demand for more platforms of online payment is growing by the day especially with the rise of ecommerce accelerated by the COVID-19 epidemic. Cryptocurrency payments are at the right wave at the right time. With a projection of around USD 5.69 Trillion E-commerce by 2022, cryptocurrency payment is expected to take a huge chunk. This trend is evident from the rise of firms in various sectors accepting cryptocurrency payments nowadays.
Firms that accept Crypto Payment
One of the greatest challenges that keep many merchants away from using Crypto payments is the extremely fragile or volatile prices. Besides, some tax regimes in some countries do not allow or recognize the use of such coins as part of the payment. However, as the financial revolution continues to take shape, more and more firms are expected to embrace crypto payment. Below are some firms that have so far embraced the new trend.
PayPal, Overstock, Coca-Cola, Yum brands, Rakuten, Whole foods market, Starbucks, Subway, Shopify, Microsoft, Pizzaforcoins, and others.
What this means for the Industry
The Cryptocurrency payments markets have seen increased transactions. In April 2021, Bitcoin processed around 250,000 daily transactions while ethereum processed 1.4 M daily transactions, up 70% more than a year back. The choice of receiving cryptocurrency as a mode of payment is a significant one, business organisations ought to evaluate the impact to their organisations. Regtank have investigated and below are some key takeaways.
Fast Payment process
Cryptocurrency transactions are fast; in most instances, they are almost instant. The traditional method to transfer money overseas takes time if not days. Another interesting differentiator is the fact that the transaction once completed is final and cannot be reversed or stopped. It is a decentralized payment process where no intermediaries are involved. Therefore, it can mean more financial security and independence to the business. The loss factor through delayed arbitration or unforeseen reversals is under control.
Adapting to the Tax Regime is A Challenge
Since it is decentralized, adapting to the changing tax regulations can be a challenge. There could be an added taxation to the crypto if the mother country describes it as a property. It could result in double taxation, or a person filing the wrong returns. In some other countries, Cryptocurrency transactions are not allowed. All these and many more mean that investors should liaise with the local authorities on the way forward if they are to start accepting crypto as a payment medium. Not doing so could land them into serious financial problems with their respective governments. The market is still relatively new; therefore, investors have to take extra precautions while embracing the new technology.
Unpredictable Price Swings
Even though many investors have made millions through the volatility of crypto value, many have also lost millions. If a customer pays when the cryptocurrency price is high, then abruptly it crashes to all-time lows, it means that the merchant holds on to the currency until it gains value or they exchange it at a loss. However, some merchants have taken control of that effect by automatically converting the digital coins to Fiat Currency. This method is less volatile, limiting losses. In the event, the price downtrend happens before the conversion, then the investor will have to bear with the outcome. Worse, if a trader prefers to keep value in the form of digital coins then chances are they will have to wait until prices go up again.
Gaining Access to New Customers
Many traders are investing in digital currency all around the world. If a business is a local venture, when it starts accepting cryptocurrency payments, international consumers are able to easily purchase. Another aspect is the low fees as compared to traditional methods. This could help businesses expand their presence globally and open more frontiers of business collaboration in the future.
Low Transaction Fees
There are no direct processing or transaction fees when one pays using Cryptocurrency as opposed to other methods. The fact that there is no third party in the process means that no extra charges are levied. What is likely to be charged is only a minimal fee for the network processing.
Limited or no Frauds/Mitigation charges
Since the transactions are irreversible, the issue of people defrauding the business through illegal reversals is tamed. Once a transaction goes through the initiator cannot reverse it at all. Another important aspect is that no third-party dispute settlement, therefore; no extra charges are applicable.
The KYC/AML Regulation
The cryptocurrency market has been unregulated at the start. It is only recently that more countries started enforcing regulations to increase accountability for players in the industry such as mandatory licenses and increasing the scope of AML to cover cryptocurrencies. The lack of KYC or AML laws gave fraudsters and money launderers a leeway to promote their illegal activities. In 2019, alone USD 2.8 Billion was laundered in the crypto market. The same year, it was agreed that crypto exchanges be treated as money transactions becoming subject to AML/KYC laws. It was a unanimous decision between SEC (Securities Exchange Commission), CFTC (Commodity Futures Trading Commission), and FinCEN (Financial crimes Enforcement Network). Thereafter, new regulations for the market started being enacted. Even businesses that have been in operation are required to start afresh with all AML/KYC regulation, scrambling to get their compliance infrastructure ready.
Finally, with more and more firms embracing this new payment medium, more countries will likely introduce regulatory measures to tame money laundering that might happen. If you are looking to accept cryptocurrency payments, be sure to understand your regulatory compliance landscape, choosing the right regtech partners, ensure the security of your crypto wallets as well as having clear accounting standards.
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