Richard Hartnett Richard Hartnett Associate Manager, Communications and Strategy, U.S. Chamber of Commerce

Published

February 02, 2022

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Cryptocurrencies, a tradable digital asset or digital form of money, are growing in popularity with Americans. After initially taking a wait-and-see approach, more businesses are accepting Bitcoin and other cryptocurrencies as a form of payment. Roughly one-third of small business owners and top-level executives say their companies currently accept cryptocurrencies according to a recent survey by business invoice software provider Skynova.  

The move to touchless payments among both consumers and retailers during the pandemic also deserves some credit for the increased adoption of digital currencies, with numerous payment providers like PayPal and Square now allowing users to pay in Bitcoin. That, combined with improved infrastructure that makes it easier for people to convert cryptocurrencies to cash, is giving people more confidence in the use of digital currencies. According to a recent survey conducted by Pew Research Center 16% of U.S. adults have personally invested in, traded, or otherwise used one or more cryptocurrencies. This is up from just 1% when the research firm asked Americans in 2015. 

With more consumers looking to use cryptocurrencies to purchase goods and services, particularly over the internet, leaders across industries are increasingly asking if now is the right time for their businesses to start accepting digital currencies. And while the answer is unique for each business — with leaders having to weigh whether accepting them would be beneficial to grow revenues against the risks of being an early adopter — here are a few key points to consider. 

What are your customers saying? 

According to the Skynova survey, 37% of business owners said desire from consumers influenced their decision to start accepting cryptocurrencies. Moreover, 44% said they’ve started to accept cryptocurrencies to reach younger generations and acquire new customers. Still, while cryptocurrencies are growing in popularity overall, some businesses’ customer bases may not be ready to use them — or at least not right now. Businesses considering adopting cryptocurrencies should therefore evaluate whether their customer base has or is likely to begin using them. 

Not all cryptocurrencies are created equally 

Digital currencies have actually been around since the ‘90s, and as of last count, there are more than 10,000 different cryptocurrencies in existence. Defining an asset as money is not necessarily black and white, but money has the characteristics of a store of value, a unit of account, and a medium of exchange.

Bitcoin is the largest and most popular cryptocurrency, but others include Ethereum, Binance Coin, Litecoin, and more. However, many cryptocurrencies have tiny user bases, and for that reason may never become a prevalent tender for transactions. Most businesses are likely to accept only those currencies with large established user bases. 

Cryptocurrencies fluctuate more in price than traditional currencies 

Cryptocurrencies, on average, fluctuate much more in price than government-issued currencies. This volatility may carry risks for companies holding them on their balance sheets. For this reason, some companies have opted to convert cryptocurrencies into government-issued currencies or stablecoins – cryptocurrencies pegged to traditional currencies like the U.S. dollar.  

Cryptocurrencies are taxed differently than cash 

The Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes. Because of that, businesses are required to track their values from the time when they are received until the time they are sold. This can be a labor-intensive process for businesses depending upon the cryptocurrency transactions they process. 

Cryptocurrencies are becoming safer and more secure 

One of the biggest obstacles holding back the widespread adoption of cryptocurrencies is the fear that they aren’t secure. While there are instances of digital wallets being hacked, the security for the transmission and store of cryptocurrencies has significantly improved. It’s imperative that businesses still ensure they understand and account for security risks as they would with the use of cash and methods of payment. Perceptions about their use will likely continue to improve as consumers become more familiar with cryptocurrencies. 

The regulatory environment around cryptocurrencies is still uncertain 

With increased use by the public, national governments are scrutinizing cryptocurrencies with more vigor than in previous years. Concerns about financial crimes, financial stability, monetary policy implications, and consumer protection will likely lead to increased regulation of cryptocurrencies in the coming years. This regulation could provide more certainty for the permissible uses of cryptocurrencies in the long-run but is cause for unnecessary uncertainty in the short run. Maybe one of the largest obstacles to commonsense regulation in the U.S. is a lack of agreement among financial regulators about the scope of their respective jurisdictions. For example, the SEC and CFTC have yet to come to an agreement on which agencies' regulatory applies to the myriad different cryptocurrencies. In the meantime, other countries are moving forward with implementing policies that minimize regulatory uncertainty and promote cryptocurrency as a form of payment.   

Non-fungible tokens (NFTs) are not digital currencies 

Non-fungible tokens (NFTs) also exploded onto the financial scene in 2021, and though they are often referred to interchangeably, they are not the same as digital currencies. NFTs are digital certificates verifying the authenticity and ownership of virtual or physical assets. NFTs aren’t normally a form of payment. Rather, they are digital records that assign value to an asset that can be bought, sold, or traded by validating its originality. The token tracks an asset’s movement, triggering payment once it is transferred from one owner to another. 

Whether or not cryptocurrencies will become more prevalent in consumer transactions will likely depend both on their market performance and regulatory environment. Businesses considering accepting cryptocurrencies will also have to weigh the risks and benefits of potentially expanding their customer base  and an increased complexity in payment processing and accounting methods. That said, as more consumers and firms begin using cryptocurrencies for transactions, it is unlikely that their use will fade in coming years. 

About the authors

Richard Hartnett

Richard Hartnett

Associate Manager, Communications and Strategy, U.S. Chamber of Commerce

Richard is an associate manager on the communications and strategy team.

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