The Digital Gold Rush: Should Your Business Accept Cryptocurrency? | Adler Pollock & SheehanPC

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Cryptocurrency, Bitcoin, Ethereum. You have probably heard of these terms because cryptocurrencies, and Bitcoin in particular, have seen immense growth in recent years, the so-called “digital gold rush”. In 2021, cryptocurrencies and digital assets in general surpassed a market capitalization of $3 trillion.[1] It is estimated that around 2,300 US businesses already accept Bitcoin for investment, operational and transactional purposes.[2] Accordingly, this blog aims to provide (i) a brief overview of the opportunities that cryptocurrencies can provide for your business; and (ii) the process your business must establish to properly accept cryptocurrency.

If you are unfamiliar with cryptocurrency, you may be wondering how it works and what it can do for your business. At its simplest level, cryptocurrency is digital currency, stored in a digital wallet, which is powered by electronic blockchain technology. The blockchain, at its core, is a decentralized digital ledger that stores information about every transaction. Therefore, when people buy, trade, or spend cryptocurrency, those transactions are recorded on a blockchain.

So why should your business consider implementing cryptocurrency into its business model? First, cryptocurrency can provide access to new customers who value transparency in their transactions. Second, cryptocurrency could provide access to new capital flows and pools of assets. Third, and perhaps most importantly, introducing cryptocurrency to your business now can help position your business for a future that could include central bank digital currencies (which may arrive sooner than you expect). think so).

Indeed, following the digital gold rush of 2021, the federal government, thirty-seven states[3] and Puerto Rico have taken steps to “address the risks arising from the growth of digital assets and blockchain technology while supporting responsible innovation.”[4] On March 9, 2022, the federal government issued an executive order setting out “a national policy for digital assets around six key priorities: consumer and investor protection; financial stability; illicit financing; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.[5] Similar initiatives are underway at the state level. The Rhode Island General Assembly, for example, is considering House Bill 7254,[6] which, in relevant part, establishes an economic growth blockchain law, regulates virtual and digital assets, and establishes custodian banks for these purposes.

If you decide to implement cryptocurrency into your business model, you will need to decide what role it will play in your business operations. Will your business hold cryptocurrency on its balance sheets, or simply embrace crypto-enabled payments? The latter being the easiest and quickest entry into digital assets. Assuming your business adopts crypto payments, the actual process is quite simple. Generally speaking, you will need to create an account on a cryptocurrency exchange, such as Coinbase.[7] Next, you will need to add functionality to your business website (that is to say, a QR code), so customers can send payment to your exchange account. Then, after receiving payment, you will need to withdraw the cryptocurrency funds from your exchange account, exchange those funds for traditional currency, and transfer the funds to your business bank account, all of which can be done from your computer .

As with any new business opportunity, it is important to anticipate, prepare for, and engage in thorough discussions with business partners, legal counsel, tax advisors, and your IT department.

[1] The White House briefing room, Fact Sheet: President Biden to Sign Executive Order to Ensure Responsible Development of Digital Assets (9 March 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-assure- responsible-innovation-in-digital-assets/

[2] Identifier.

[3] Heather Morton, Cryptocurrency Legislation 2022National Conference of State Legislatures (March 17, 2022), https://www.ncsl.org/research/financial-services-and-commerce/cryptocurrency-2022-legislation.aspx.

[4] The White House briefing room, above footnote 1.

[5] Identifier.

[6] HB 7254, 2022 General Assembly Jan. (RI 2022)

[7] Coinbase, https://www.coinbase.com/ (last visited April 19, 2022).

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