Your Crypto Questions Answered

Cryptocurrency is a new and evolving form of payment, and many business owners aren’t sure where to start. An increasing number of companies worldwide have been accepting bitcoin and other cryptocurrencies for transactions, investments, and other operational purposes. Explore various questions and insights into what cryptocurrency could mean for your business below.

Paypal and Venmo are offering cryptocurrency exchange platforms

Paypal does not allow you to own your cryptocurrency or send it to other wallets. Similar to investing platforms that offer cryptocurrency, you can purchase these currencies and sell them for a gain or loss on Paypal. Typically, when you purchase cryptocurrency, you are given a public key and a private key pair to make your ownership official. However, platforms such as Robinhood and Paypal do not give you your own private keys or wallet addresses for your own currency. Through these platforms, you only have access to the public keys. These two keys represent your ownership of your own asset, so without these it is difficult to establish ownership of the cryptocurrency. Using Paypal, Venmo, and other online applications are often described as the “baby steps” of entering the cryptocurrency space until you’re ready for more complex exchanges.

What platforms are available for businesses to receive or make payments in Crypto? Do they connect to QBO?

QuickBooks needs a third-party application to track and record your cryptocurrency transactional data. This third-party application (examples include BitPay or Shopify) should be able to process Bitcoin payments and can integrate with the program. Examples of third-party applications that track cryptocurrency transactions include:

  • Bitcoin Sync by Blockpath
  • Bitpay
  • Coinbase

To connect your third-party application to QBO, follow these instructions:

  • If you have a QuickBooks Online account and are signed in, go to Paybycoin.intuit.com.
  • Get your Bitpay (or whichever site you choose) API key.
  • Once the API key is linked to QBO, once you generate an invoice on QBO, you should see an option to let customer pay by BTC (or whichever currency you choose).
  • When the customer receives the invoice, they can either scan the QR code provided on the invoice or copy and paste the address for their BTC wallet.

How do you account for Crypto transactions as a business owner?

For tax purposes, keeping cryptocurrency is accounted for as property if kept for a longer duration and not immediately converted to fiat. For bookkeeping purposes, it is treated more as a cash equivalent with a GL account being required for each currency, much like holding foreign currencies.

When it is converted into fiat currency (USD, EUR, etc) on an exchange, there are fees incurred. Keeping cryptocurrency as cryptocurrency and not converting it into fiat will result in the least fees. When cryptocurrency is used to purchase goods and services from a business, there are no fees for receiver (the business) and there are minimal fees paid by the sender.

As a business owner, you can accept a buyer’s payment of cryptocurrency as cryptocurrency, or have it automatically converted to fiat such as USD if you choose. For accepting a customer’s cryptocurrency as cryptocurrency, you will need a cryptocurrency wallet (via an exchange or hardware wallet). If choosing to have the customer’s cryptocurrency converted to fiat, you will need to link a bank account to the processor.

Businesses accepting cryptocurrency for sales have reduced fees if using exchanges such as Coinbase or Bitpay (up to $1 million USD).

Accepting cryptocurrency as a business

There are various options a business can use to accept cryptocurrency. The most widely used options for accepting cryptocurrency are:

  • Use a cryptocurrency merchant processing system (Coinbase or Bitpay). Using a merchant processor will result in the creation of form 1099-MISC which will be shared with you and the IRS. Please note that this is as of tax year 2020. In the past this has changed from form 1099-K which could indicate future changes to this process.
  • Use a traditional merchant payment processor (Stripe, Square, Braintree). Using a merchant processor will result in the creation of form 1099-MISC which will be shared with you and the IRS. Please note that this is as of tax year 2020. In the past this has changed from form 1099-K which could indicate future changes to this process.
  • Accept cryptocurrency directly to your own cryptocurrency wallet (via an exchange or hardware wallet). Using your own cryptocurrency hardware wallet to accept payments is not linked to any reporting entity, company, or any other party except yourself or your business. This is similar to accepting cash for goods or services and reporting these currencies would be your responsibility as a business.

If you would like to discuss what cryptocurrency could mean for your business, please contact your Adams Brown advisor.