Things to Consider Before Accepting Crypto Payments

Things to Consider Before Accepting Crypto Payments

by Tom Hodnefield, CPA

March 25, 2022 β€”Should you be accepting crypto payments? You probably have seen the big swings in the values of these e-currencies, so unless there’s a really good business reason for you to start or you want to spend a lot more time watching digital exchanges and figuring out tax implications, the best advice now is to be cautious.

Pew Research found only 16% of Americans have had any exposure to cryptocurrency - so this technology remains in its infancy in terms of widespread acceptance. 

However, even the US government is considering an official move to crypto. President Joe Biden just signed an executive order instructing agencies, including the Treasury and Commerce Departments, to investigate how cryptocurrencies might fit into America’s central banking system.

β€œAnalysts view the long-awaited executive order as a stark acknowledgment of the growing importance of cryptocurrencies and their potential consequences for the U.S. and global financial systems,” reported Reuters. They note that the cryptocurrency market passed the $3 trillion mark in November 2021.

Again, there are very few sound business reasons to begin taking crypto payments. However, if you’re going to consider it, here are the things to take into consideration.

What Is Cryptocurrency?

Credit cards revolutionized the way businesses accept transactions and made e-commerce possible. Crypto also facilitates in-person and online transactions. However, the transactions move directly from payer to payee without a bank or other financial institution in the middle to verify them. Data is highly encrypted (therefore the name) – recorded on a digital public ledger that uses blockchain technology to prevent hacking or malicious changes. And, of course, your cryptocurrency is stored in a digital wallet.

Bitcoin was the original crypto, created back in 2009. It is still the industry leader, though thousands of new variations now exist, collectively known as β€œaltcoins.” Many of these have fizzled out and are now worthless. You have to remember that any cryptocurrency is only worth what you can sell it on an exchange for. 

Why Consider Accepting Crypto Payments?

Businesses are trying to adapt in our rapidly changing marketplace and meet the future head-on. However, there is no guarantee that crypto is the future. There are some technology companies who are opting to deal in digital currencies. These are some of their reasons for doing so:

  • You may get paid faster and retain more revenue since there is no third party involved. That could improve cash flow and lead to faster, more accurate, and more transparent internal accounting and reporting.
  • If your key clients or vendors are already using crypto, your own use of it to accept payments and make disbursements could help your firm retain loyalty and remain competitive.
  • New customer interest, especially from younger and investment-savvy clientele. Global Bitcoin transactions among small businesses alone now exceed $1 billion per day.
  • Access to new digital funding pools.

Would any or all of these factors enhance your ability to achieve corporate goals? These potential advantages probably only apply to a very small number of firms. 

How Will Implementation Work?  

There are two ways you can enable cryptocurrency payments. You can either partner with a third party that specializes in crypto payments (passive approach) or handle the transactions and oversight of your new currency assets yourself (active approach). Here’s how the two approaches compare. 


The crypto never appears on your balance sheet. Conversion between crypto and fiat cash is handled by your third party service acting on your behalf. They charge a fee and take on much of the responsibility for managing risk, ensuring compliance, answering customer questions, etc. Since this approach is simpler and less risky, you may want to start here and expand to hands-on in the future if that makes sense for your business.


The active approach eliminates the third party, giving you full control (and responsibility) for all aspects of crypto usage reporting. The rewards can be more extensive, depending on your goals, but this approach is considerably more complex. You’ll need to dedicate resources to monitoring your crypto assets and the markets they’re traded on.

Whichever you choose, there are plenty of detailed questions to answer about implementation because accepting crypto payments will affect your business across the board. First and foremost, you have to consider whether or not you should accept cryptocurrency. If it makes sense for your business, you must also consider:

  • Which cryptocurrencies to accept. Some are not accepted by all services.  
  • How will you blend crypto transaction data with existing point-of-sale, inventory, accounting, and other systems for day-to-day operations and monthly financial reporting? Do all these tools integrate with your chosen crypto tool?
  • Your cash to conversion plan. You can convert crypto to cash immediately, on a regular schedule, or you can hold it indefinitely, but each option has implications for cash flow and other aspects of your operations. Keep in mind that as an investment asset, the value of crypto fluctuates.
  • Creating a user interface that meets customer expectations.
  • Tax implications.
  • Staff training that will be required.

Taxes and Crypto

Crypto is taxed and it’s rather complex. Cryptocurrencies are treated like property for tax purposes, and thus any sale, liquidation, or exchange to other cryptos becomes a taxable event. Obviously, this will make operating a business on crypto much more complicated both from an accounting and taxing standpoint.

Expert Advice May Be the Most Valuable Currency

With the federal government just now starting to consider the ramifications of cryptocurrencies, some states are taking action on their own to regulate crypto, further complicating the landscape for businesses. For example, the state of Colorado will begin accepting crypto payments for state taxes and fees by the end of this summer.

Variable state-level actions and impending federal decisions underscore the value your accounting team can bring to your company’s decision-making. Outside experts familiar with the tech industry and the crypto marketplace can help ensure you ask all the right questions and consider all factors relevant to your specific circumstances to make appropriate decisions in the near-term and as crypto continues to evolve.

Whether one makes payments to foreign individuals or foreign businesses, there are specific tax rules that one needs to consider.

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Tom Hodnefield, CPA

Tom Hodnefield, CPA