How Can an Entrepreneur Switch from Fiat to Cryptocurrency?
Imagine you want to change some of your business processes from dollars, rubles or euros to cryptocurrency. How would you do it?
Here’s a step-by-step guide to converting your business to cryptocurrency.
Let’s consider a basic scenario where you want to accept cryptocurrency as payment, but you don’t know how to go about it.
Determine How Ready You Are to Work with Cryptocurrencies in the Legal Field
The reason we say this: Sooner or later, state regulators or tax authorities will start asking questions.
Cryptocurrencies are not legally recognized in all countries. Certain states have decided to strictly exclude such financial instruments from the legal field. That’s why it’s important to research the laws of the country where you plan to work.
Those who are registered in Belarus and perform digital money transactions are exempt from value-added income tax payments until 2023. However, there is one “BUT” and several requirements for companies who wish to work with cryptocurrencies. The full list is given in Decree No. 8, of which here is a summary.
As a means of payment, cryptocurrencies are legal in Japan, Germany, France and Estonia. Cryptocurrency is partly legal in the UK; exchangers operate and pay taxes, after passing a strict state registration procedure.
Determine if the Еransition to Cryptocurrencies Will Be Profitable for Business
The reason we say this: Introducing cryptocurrency payments isn’t always rational, so there are ways to identify the profitability of this decision.
There are certain goals to consider when implementing cryptocurrency payments. These include speeding up transactions between the customer and the business, regardless of geolocation or lunch breaks at the bank. For example, as a payment system, Bitcoin does not require PCI compliance and can process payments in less than three days The same is true for other cryptocurrencies. Furthermore, there is also a PR-benefit in the decision to start operating with cryptocurrencies, and this is an attractive new feature for consumers.
Cryptocurrency payments are all the more advantageous if the B2C business audience includes IT professionals, traders, and crypto-enthusiasts between the ages of 23 and 35. To find this balance, you’ll need to analyze the brand’s target audience with A/B testing through creatives, surveys, and matchmaking.
A payment visualization tool can come in handy to display users by geolocation. An example would be a heatmap of cryptocurrency transactions in fiat exchange operations. This will help to establish the general picture.
This map tracks cryptocurrencies being used to pay for physical purchases: food, transportation, shopping, sports, rent. The hotspots are in Northern and Western Europe, the UK, and the US.
Check if the Market Niche Is Suitable for Switching to Cryptocurrencies
Conventionally, it is suitable if more than 15% of clients use some particular type of cryptocurrency. Here is a list of niches, where digital assets have been successfully implemented:
- E-Games, betting, trading.
- Cryptocurrency journalism.
- Cryptocurrency content production.
- Marketing of cryptocurrency projects.
- Niches related to mining: selling goods, facilities, renting out equipment, repairing and servicing farms.
- Niches related to servicing traders, betting and crypto-enthusiasts.
- Restaurants: Starbucks, Subway, Burger King, KFC Canada, and others.
- Delivery services: Takeaway, Shuttledelivery, Lieferando.de, and others.
- Digital services: Xbox Store, Microsoft, Overstock, Namecheap.
- Retail: Home Depot, Whole Foods, NewEgg.
- Travel: Expedia, Cheap Air, ScubaOtter, Alternativeairlines.
If the niche is not listed, that’s okay: in the case of large projects, the introduction of cryptocurrencies can be an opportunity to attract a new audience. The use of cryptocurrency will be a bonus for small projects in terms of USP practice, and an opportunity to get ahead of competitors.
Form a Legal Entity to Pay Taxes
This is required in order to handle the law correctly in case of any suspicions of financial fraud or money laundering. Cryptocurrencies can actually be classified as income tax, however, this point should be clarified with an accountant.
The specific procedure and amount of the payment depend on the occupied niche. It is advisable to consult lawyers in countries where cryptocurrency activity is legal or conditionally legal, in order to correctly set up a sole proprietorship or LLC. After the crypto boom in 2018, many lawyers can help with the registration of cryptocurrency businesses. There are no specific recommendations in selecting lawyers, as such appeals are handled individually.
Get Support from State Financial Crime Regulators
This is essential for FinTech niche companies, such as stock markets or exchangers of any kind. It is usually done through https://www.fincen.gov/.
This is required to prevent the company from being unreasonably accused of violating the law. It is an additional bonus in terms of reputation, but requires the implementation of checks. A logical consequence of this would be the use of KYC technologies to verify the identity of customers, as well as the organization of the related infrastructure.
Use Cryptocurrency Gateway Services
This point is not necessary if you just want to accept payment in cryptocurrency. However, if you want more, there is a special type of service called cryptocurrency gateways.
These are companies that take charge of all legal activity, allowing the entrepreneur, or anyone else, to gain all the benefits of cryptocurrency in exchange for some kind of fee or percentage. Usually, this value is lower than the commission that banks charge for transactions of a similar size. As a result, you have a higher speed of payments compared to banks, and a chance to offer a new payment method. An example of such a provider is Cryptoprocessing by CoinsPaid.
Gateways essentially create a layer, where payment in cryptocurrency is converted into fiat for the recipient. From a legal perspective, the payment in fiat is deposited into the company’s account. However, from the user’s perspective, the payment is made in cryptocurrency.
Technically, gateways are capable of accepting direct payment from a wallet or another gateway. Companies that provide cryptocurrency gateway services must be registered in a country where such activities are legal.