Bitcoin Accepted Here
Cash. Moolah. Bucks. Smackeroos. Dough. Those folding notes are generally what get us out of bed five days a week. And what keep us up half of the night. Whether metal, paper or electronic, legal tender is what makes the world go round. So will the world stop spinning if we stop using it?
Crypto-currencies are electronic decentralized virtual value exchange systems that generally operate via the internet. Effectively they are electronic tokens that can be bought, sold, exchanged for value, earned and gifted. Still not clear? Imagine living in a giant electronic casino, where you exchange your cash for tokens, and these are used in the place of cash for transactions. Bitcoin is currently the most widely adopted crypto-currency available.
Crypto-currencies operate outside the banking and legal tender framework that has been developing for centuries. Each crypto-currency is free to establish its own operating rules and security protocols. While this gives great freedom, they must also be sufficiently robust to attract users. The red tape in relation to transactions is significantly reduced, but crypto-currencies remain subject to certain regulative fundamentals, for example, income tax, GST, anti-money laundering, countering the financing of terrorism and of course the Crimes Act.
Making new payment options available to your customers is another way to distinguish yourself from your competition. However, given the unique framework that the crypto-currency operates within, there are a few matters that you will need to consider. These include:
- Understanding how the crypto-currency operates, to make an informed decision as to whether it is sufficiently robust for your needs. You need to be sure that your ‘tokens’ are not at risk of theft or hacking, consider the difficulty of conversion back to cash, cost of conversion, reliance on third parties, vulnerability to internet exchange services being available and transaction fees.
- Your digital wallet (where you hold your crypto-currency) needs to be secure and backed up.
- Often you can have one wallet on each electronic device, so you will need to keep track of various wallets held, and make transfers where necessary.
- If you want to keep quantities of the crypto-currency for extended periods (hoarding) consider the use of a safe deposit facility. Some providers have implemented isolated networks to ensure security, and even offer insurance.
- Any crypto-currency held is subject to price fluctuations, similar to that facing foreign exchange. This could work in your favour or against you. To avoid this risk you could exchange the crypto-currency for cash immediately upon receipt. Generally a fee will apply.
- If you have suppliers that accept crypto-currency, you could use crypto-currency received to pay your bills.
- Anonymity associated with crypto-currencies has triggered a lot of speculation (rightly or wrongly) in relation to use for criminal activities. However, unless users have implemented extensive measures in relation to their use of the crypto-currency and the internet generally, it is difficult for use to be truly anonymous. This is especially the case with Bitcoin, as transaction details are publicly available.
Adoption rates will determine whether particular crypto-currencies make it into the mainstream or remain on the fringe. You will need to assess (and continue to assess) what the adoption rates are in your industry and within your customer base, to determine whether the risks, costs and operational burden are outweighed by the potential increase in revenue.
In answer to my initial question, while crypto-currencies will continue to challenge law makers and law enforcers, they are simply another way to pay for goods and services outside the legal tender framework. As such, you can relax - the world will not stop spinning!
Chris Steenstra is an Associate at Norris Ward McKinnon, specialising in IT and Commercial Corporate law. You can find out more about us here. Email Chris at: [email protected]