In 2009 when Bitcoin was first invented and introduced, very few people knew about it or understood it. However, Bitcoin has increased in popularity over the past few years with more and more companies agreeing to accept the digital currency as one of their forms of payment. However, should your business begin accepting Bitcoin for payment of services or goods? Our South Carolina business and commercial lawyers can help you determine the best choice for your business.
What is Bitcoin?
Bitcoin is a form of digital currency used to pay for goods and services over the internet. In addition to accepting Bitcoin as a form of payment, you can also acquire the digital currency in other ways. “Mining” is a popular way to obtain the currency. Special software is used to solve a key that opens or verifies transactions. For finding the key, you receive 25 Bitcoins. In addition to mining for Bitcoin or accepting them as payment, you can also purchase them from a Bitcoin exchange.
Bitcoins increased in value rapidly making them appealing for investors. However, cryptocurrency has its risks, and some individuals lose money instead of making money by dealing in Bitcoin.
What are the Benefits and Risks of Accepting Bitcoin for Payment?
Some companies may be comfortable accepting Bitcoin for payment, but it may not be a prudent choice for your company. However, some of the benefits of cryptocurrency can make it an appealing option. For instance, you do not need to pay a fee to accept Bitcoin as payment. Credit card transactions, bank wires, and other financial transactions can require a processing fee that can be expensive. Furthermore, transactions involving cryptocurrency are typically faster than other forms of payment. Payments cannot be disputed like credit card payments or PayPal payments, and you are not required to meet the strict Payment Card Industry security standards.
However, using Bitcoin has several risks. Cryptocurrency is not regulated; therefore, any disputes or issues may be very difficult to resolve. Bitcoin has increased in value in the past, but as we have witnessed, the value of cryptocurrency is not guaranteed. Compared to the dollar, Bitcoin is unstable and subject to market volatility. There is no insurance guarantee when accepting Bitcoin as payment and your online “wallet” used to hold your cryptocurrency is vulnerable to hacking. Just like cash, if your Bitcoin is stolen, it is gone forever.
Protect Your Business
If you decide to accept Bitcoin as payment for goods and services, you need to take precautions to reduce any risk. For example, you should not accumulate large sums of Bitcoin in your virtual wallet. Cashing in the cryptocurrency through an exchange and placing the funds in a federally insured bank can reduce the risk of losing money because of breaches.
It may be tempting to hold the Bitcoin because they may increase in value; however, if your wallet is hacked, you could lose hundreds of thousands of dollars depending on the amount of Bitcoin in your account.
Consult a South Carolina Business Attorney Regarding Bitcoins and Other Cryptocurrency
Our South Carolina business attorneys can review the pros and cons of Bitcoin as a form of payment in further detail during a consultation. Contact our South Carolina banking lawyers at Willcox, Buyck & Williams, P.A. For many businesses, the risks of accepting cryptocurrency for payment outweighs the potential benefits, but it cannot hurt to discuss the matter with an experienced business attorney.