As cryptocurrencies rise in popularity, more and more small businesses are opening up to the idea of accepting cryptocurrency in transactions or investing themselves. When diving into this branch of business, business owners should consider not only the benefits of crypto, but the risks of accepting cryptocurrency as a small business as well.
Although cryptocurrencies are becoming increasingly commonplace, their volatility is still to be feared by small businesses. Small businesses without funds to recover could find their failure in cryptocurrency for this sole reason. For example, Bitcoin was first valued in pennies in 2009 but increased to more than $65k per coin in 2021.
Price volatility is not the only concern nor risk when accepting cryptocurrency as a small business:
Due to it’s new acceptance as a form of currency for transactions and widespread fame, cryptocurrencies are facing new regulations from the government yearly. The latest regulation, an executive order in March of 2022, requires the U.S. Treasury Department, the U.S. Commerce Department, and other key agencies to study and report the role of cryptocurrency in the U.S. market. The administration is concerned over lack of market oversight and threat of cybercrime – they are also currently examining addional risks.
Since cryptocurrency exist digitally, proof of owncership is limited to the private keys used to authenticate transactions. This information is a common target for hackers, which makes these transactions dangerous for your business. Cryptocurrencies are also favored by cyberattackers and is a requested form of payment from ransomware groups. New protections are in development daily, but the current market is still experiencing fails in cybersecurity which could lead to a crucial loss for your business.
Cryptocurrency is notable for it’s anonymity, or lack of public transaction and user information. The details of crypto users and transactions are typically held in a public ledger with names and locations encrypted. This becomes an issue when complying with customer identification or fraud protection regulations.
With new regulations and requirements coming out, ensuring your business is compliant with the latest information can be tricky. If not up-to-date, you can face problems with compliance, reporting your taxes, or managing income. If you have a dedicated finance department or virtual finance department, share your concerns before moving forward with cryptocurrencies.
Navigating and weighing the risks of cryptocurrency can be down with a consultation with an experienced financial or advisory firm. Other options may include reaching out to a virtual finance department such as ModVenturesLLC. Virtual finance departments focus on more than just management of funds and are prepared to assist in new age developments like cryptocurrency and if they’re right for your business. Consult with ModVentures today.