Cryptocurrency Accounting for Business: A Comprehensive Guide
Welcome to the first part of our in-depth guide to crypto accounting for businesses. For starters, we cover the introduction to the topic and explain the benefits and drawbacks that businesses will encounter when working with crypto. Here, you can find Part 2 and Part 3.
It seems that times when crypto-assets were merely a geek thing are over. Cryptocurrencies are on the verge of becoming legit money in many countries other than El Salvador, renowned as the first-ever country to recognize crypto as legal tender.
As many users have already piled up enough different crypto coins, they are looking for ways to spend what they have. The only problem is: there aren’t many businesses that will accept crypto as a payment method. Yet.
On the other side of the market, there are business owners that recognize the potential of crypto and the importance it will have in the future. Their main concern isn’t whether or not they will find crypto-paying customers, because customers are many and willing to spend their digital coins.
The main concern for every business owner willing to allow crypto payments is how to manage accounting crypto. The legal matters surrounding crypto are still vague, and we are all participating in the making of the new crypto business accounting framework.
In this article, we compiled the crucial information you need to know in order to successfully process crypto payments and perform crypto-asset accounting.
Let’s get right to it!
Introduction to Crypto Accounting Audit
As previously stated, there are international companies that are integrating cryptocurrencies in their financial processes. Among the most important trendsetters in this regard are Tesla and Microstrategy. Last year, both of these companies added $0.5 and $1.5 billion worth of Bitcoin to their balance sheets, respectively.
Such steps undertaken by big players inevitably inspire other businesses as well. According to recent reports, there are 2,300 businesses running in the U.S. and accepting crypto payments. If we include businesses that provide a cryptocurrency ATM, this number immediately rises to 5,968.
These numbers show that the U.S. is undoubtedly the world’s leader when it comes to crypto adoption. It is followed by Italy and Slovenia, with 1,366 and 1,133 businesses accepting crypto. Except for these two countries, the EU has another two members among the top-ten crypto-friendly businesses: Germany, Spain, and the Czech Republic.
When it comes to the UK, with around 430 businesses accepting crypto payments, it currently holds 13th place on the list of the countries with the highest number of businesses accepting crypto.
On the BitcoinWide platform, you can find more than 7000 businesses that accept crypto. For the convenience of the user, there is a map where you can see businesses from 150 countries and the usual search as in Google.
Different Levels of Accepting Crypto
There are multiple ways a company can include virtual currency in its financial operations.
To begin with, companies usually begin with simply accepting customer payments in exchange for products or services.
However, there are companies that take things a step further. They find more sophisticated ways to incorporate cryptocurrencies, such as paying their employees, contractors, or suppliers in crypto. Using cryptocurrencies in a wider selection of financial operations implies a somewhat more complicated accounting process.
Although it is not an impossible task, your accountant trying to work out your crypto finances if will probably encounter a few difficulties. He or she will need to deal with an asset whose value is highly volatile and still not legally defined.
Trying to count taxes and comply with anti-money laundering laws with such a fleeting asset might seem like building castles in the air. And partially, it currently is something like that.
However, national financial and legal bodies are beginning to recognize the legal vacuum. Many actors in the crypto industry are hoping that things are on the way to change for the better.
Businesses Require a More Precise Legal Guidance
Luckily, businesses and accounting firms aren’t waiting for the legislation to appear out of thin air.
The situation in the U.S., for example, shows that there is a strong initiative to change and create more specific crypto rules.
Numerous CPAs and accounting firms, as well as members of Congress and the Chamber of Digital Commerce are putting pressure on national financial institutions members of Congress and the Chamber of Digital Commerce to address the crypto industry with more attention.
Additionally, the issue has been attracting a lot of media and social media attention recently.
Financial Accounting Standards Board (FASB) is the door most of these initiatives are knocking on.
Luckily, on the other side, there are signs of willingness to start changing the current status quo. In summer 2021, the FASB invited interested stakeholders to submit opinions and ideas regarding the announced technical agenda.
What Can Crypto Do for Your Company?
When it comes to incorporating cryptocurrencies into your balance sheet, the main question is: do the benefits outweigh the trouble?
There is no definite answer to this question. Each business needs to make that decision individually, based on its particular set of goals, assets, values, etc.
However, there is a list of the most common benefits businesses get to enjoy when they start accepting crypto. And, as the matter of fact, it is not short.
To begin with, using crypto will allow your business to reach new target audiences. According to some estimations, the new customers make up around 40% of the customer base for businesses that introduce crypto payments. And, these newcomers tend to spend almost twice as much. Above all, these businesses attract a clientele that is into the latest technology and favours online transparency and privacy.
Furthermore, accepting crypto is a great competitive advantage. It sends out a message that your company is innovative and ready to face the future of technology and finance.
Also, another important reason for businesses to start accepting crypto is the ability to access new liquidity pools and sources of capital, that would otherwise be unavailable.
Besides, although introducing crypto is a complicated process, crypto has some superpowers fiat currencies don’t. With digital currencies, users get to have real-time insight into their revenues.
B2B Business Opportunites
And if you are running a B2B business, you can expect some important benefits as well. As more and more companies are realizing the benefits of crypto, they too will start looking for stakeholders that adopt disruptive technologies. There are multiple reasons why companies that might be your clients could be interested in crypto:
- Simple, fast, and secure money transfers
- Better control over capital and transactions
- Opportunities for more effective risk management of digital investments
- Strengthening the company’s resistance to inflation and political instability
This concludes this part of the guide. In Part 2, we thoroughly examine the actual process of managing crypto accounting, and we go through the finest crypto accounting software tools.
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