What Is Cryptocurrency and Should Your Business Use It?

Cryptocurrency, also known as crypto, is a type of anonymous digital or virtual currency that, unlike other forms of currency, is not backed by any central authority or government. While the currency is not backed by a traditional source, like the Federal Deposit Insurance Corporation or FDIC, crypto is secure thanks to blockchain, an ongoing, re-verification recording of every single transaction of the currency’s use.

Simply put, blockchain is a decentralized, and sometimes public, record of all transactions — a digital ledger if you will. However, unlike a traditional ledger, blockchain is not owned by one source (i.e., the bank or a business); it is distributed across all participants using that cryptocurrency. Blockchain ensures that cryptocurrency cannot be double-spent or counterfeited while also removing the need for a third party to be involved in the verification of funds between parties that don’t know each other.

Since 2008 when the first cryptocurrency launched, digital currency has grown in popularity. Today, there are thousands of different types of cryptocurrencies, many competing at the same market capitalization level as some of the leading traditional financial institutions. As of Jan. 1, 2022, the two most popular cryptocurrencies by market capitalization are bitcoin and ether. If you’re interested in seeing a complete list of cryptocurrencies, visit

In order for any individual or business to accept and use cryptocurrency, one must set up a digital wallet. A digital wallet, which is password protected just like cryptocurrency itself, is a way of storing digital monies until you are ready to use them.

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Advantages of cryptocurrency

Crypto offers several advantages over traditional finance and banks. First, cryptocurrency is 100% virtual. There is no need to ever set foot in a bank or go to an ATM. When buying and using crypto, you’re not asked for an ID nor are you required to set up any type of account that contains personal identifiable information like a social security number or address.

According to Ryan Firth, CPA/PFS and owner of Mercer Street, a Houston-based firm specializing in personal and crypto financial services, the biggest advantage of cryptocurrency is security. “Blockchain makes cryptocurrency incredibly secure. It’s nearly impossible to brute-force attack a user’s wallet as each user is assigned a unique private key that is required to conduct any and all transactions,” shared Firth.

Two of the most precious things for any business owner are time and money. Luckily, these are two advantages of crypto — speed and lower fees. Compared to traditional finance, cryptocurrency transactions can take place quickly. Rather than a day, or days, to transfer funds, crypto transfers can take as little as a few minutes as they are processed in real time.

Generally speaking, the cost of using crypto is lower than using a traditional banking institution or credit card issuer. For example, there is no monthly fee associated with storing cryptocurrency and when it comes to sending and receiving money, both domestically and internationally, the costs are significantly lower.

Lastly, cryptocurrency opens doors to a worldwide marketplace. As a digital currency, crypto affords users from across the globe the opportunity to pay for goods and services without the need to convert currencies. Once a business owner has received crypto as a payment, they can convert the funds into any currency they wish.

Disadvantages of cryptocurrency

While we reviewed the advantages of cryptocurrency, there are also disadvantages as well.

First and foremost, if you’re prone to forgetting or losing your password, crypto is not for you. With crypto, a one-of-a-kind passkey is required for all transactions and blockchain recordings. According to Firth, “a private key is typically long sequences of letters and numbers making them incredibly difficult to easily recall.”

Unfortunately, if you lose or forget your key, there is no password reset button or help desk. However, companies like Wallet Recovery Services are an option if you’re interested in paying for assistance on educated guesses of what your password could be. Unfortunately, most crypto owners are in the situation that if they lose their key, they lose their money, making it imperative to keep private passkeys securely stored in several different locations.

Another disadvantage to cryptocurrency is the lack of traditional protections that we’ve come to expect from traditional banking. For example, there’s no insurance on cryptocurrency. Unlike funds deposited into a bank account, there is no overseeing agent (i.e., FDIC) that protects your money. What happens if you or the cryptocurrency provider loses your money? It’s gone. Additionally, with cryptocurrency, there’s no option for disputing or reversing incorrect transitions. Simply put – you’re taking all the risk with cryptocurrency.

One of the biggest concerns that many have with crypto is its price volatility. With the exception of stablecoins, which are generally pretty closely tied to the value of the U.S. dollar, it’s not uncommon for the value of any cryptocurrency to quickly shift in either direction — positive or negative. In the last decade, cryptocurrency investments have changed the lives of individuals who quickly became millionaires overnight. However, most business owners that are interested in crypto aren’t looking to get rich, they’re looking for another payment option for their customers. The truth is, unless you quickly exchange crypto for cash in the currency of your choice, you’re essentially gambling in the crypto marketplace. If you’re interested in accepting or using crypto in your business, you’ll need to keep a close eye on the currency’s price to ensure that you don’t lose any money.

Firth adds that another disadvantage of entrepreneurs accepting and using crypto in their business is that if the value of the cryptocurrency increases before the conversion to cash is made the business owner is responsible for taxes associated with capital gains.

“It can be incredibly time-consuming to keep track of the cost basis for goods and services compared to pricing changes in the crypto market. For example, if you sell an item for 1 Bitcoin at a current exchange rate of $40,000 USD and the cost of Bitcoin goes up overnight to $41,000 USD, you’d have an unrealized gain of $1,000. If you sell the Bitcoin for USD, your business is now responsible for paying taxes on that $1,000 in capital gains. If you’re going to use crypto in your business, consider adding a cost basis tracking service on top of your bookkeeping. While a tracking service will be an added expense for your business, it will make tax time easier,” explained Firth.

Are small businesses accepting cryptocurrency?

After reviewing the pros and cons of using cryptocurrency, many business owners have decided to accept cryptocurrency as a payment form. In fact, according to data compiled by Skynova in 2021, “more than one-third (32%) of small business owners and top-level executives business currently accepts cryptocurrencies,” and “1 out of 4 small businesses owners and top-level executives that do not accept cryptocurrencies would like to do so, but their companies do not have the knowledge on how to do so.” However, the data also shows that not all small business owners will be jumping on the crypto train: “Almost half of those small business owners and top-level executives that do not accept cryptocurrencies do not plan to do so in the future.”

The bottom line

Every business owner’s situation and interests are different. Perhaps you’re curious about crypto; perhaps you couldn’t care less right now. Regardless of your current mind frame on digital currency, it’s important to keep abreast of different payment options that customers are using as this allows businesses to better understand customers and potential opportunities.

If you’re interested in using cryptocurrency in your business, talk to a qualified financial adviser and tax professional to weigh the pros and cons not only mentioned in this article, but also others that may exist.

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