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Should You Consider Using Cryptocurrency in Your Business Operations?

Author Syahirah Aiman AbbasSyahirah Aiman Abbas

8 min read
Money Talk

There are more than 4,000 cryptocurrencies that exist. Before you jump on the bandwagon, assess whether cryptocurrencies are suitable to be used in your business.

Should You Consider Using Cryptocurrency in Your Business Operations?

Today, cryptocurrency is starting to be accepted as a payment method or digital currency. Since the first cryptocurrency inception, as of January 2021, there are more than 4,000 cryptocurrencies that exist. Before you jump on the bandwagon, assess whether cryptocurrencies are suitable to be used in your business.

By the way, if you are an e-commerce company or sell digital products, you might want to keep track of your transactions, even those made using cryptocurrencies. Keeping track of these would help you get a hold of where your expenses and revenue comes in to get a good hold on your finances. If you need advice from experienced accountants in e-commerce, look no further and chat with us!

What Is Cryptocurrency?

Cryptocurrency is a digital asset or money that is mainly used to buy, sell, and invest. A cryptocurrency could be created by individuals or companies, to serve a particular purpose and has no standard value. Bitcoin, for example, is priced at USD $32,641 at the time of writing, while Dogecoin is priced at USD $0.81. The value of cryptocurrencies is determined by their coins’ availability, desirability, and usability.

The main difference between cryptocurrencies and fiat money is that they are decentralized and are not regulated by any governments or central authorities.

Cryptocurrencies run on blockchain technology, which are digital databases consisting of blocks which in turn, are made up of transactions. These transactions are encrypted for security and recorded on public ledgers. Every transaction involves two public keys and the sender’s private key.

Sending of a digital coin from one person to another must be confirmed by miners. Miners audit cryptocurrency transactions by verifying the legitimacy of these transactions. A group of miner-approved transactions are called blocks.

Miners are compensated for verifying the transactions and by solving advanced mathematical problems using supercomputers. This is called hashing. As such, it is possible to transfer assets between two parties without a central authority that facilitates the exchange. Digital coins received could then be stored in digital wallets, or used to sell, trade, or invest in other coins, or even used to buy physical goods and services.

What Are the Risks of Cryptocurrency for Business Owners?

A new business owner should be cautious before accepting cryptocurrency as payment due to the volatile nature of cryptocurrency. The value of a cryptocurrency changes quickly even within a day of trading. It could even halve in value from one hour to the next. This is because cryptocurrencies are not regulated and are anonymous.

Businesses also risk their reputations if their customers’ digital wallets are hacked and their digital tokens were to be stolen. Although cryptocurrency wallet companies are trying their best to enhance security, blockchain technology is not 100% safe from hackers. There is still a risk of being hacked into where hackers could gain illegal access and spend from a customer’s digital wallet.

Advantages and Disadvantages of Accepting Payments in Cryptocurrency

As a business owner, you may consider accepting cryptocurrency payments for your products and services due to the fast processing speed of the transaction. While credit card systems take days to process and batch out, cryptocurrency is processed immediately, streamlining your business’ cash flow.

On top of that, there are more benefits of accepting cryptocurrency payments:

  1. Reduced Transaction Fees

Small businesses are usually charged between 25-30 cents plus 2%-4% of the total transaction for each credit card swipe. Fees for cryptocurrency payments vary depending on whether you receive your digital coins in your personal wallet or through third-party wallets like Coinbase, but they are definitely less expensive than PayPal or credit card providers. There is no middleman collecting fees to facilitate the exchange.

  1. No Chargebacks for Merchants

As cryptocurrency transactions are quite similar to cash, that is, no third party could reverse the transactions and they are final, businesses are protected from fraudulent chargebacks. The blockchain system serves as a peer-to-peer objective ledger, which means chargebacks could not occur. If a consumer demands a refund, there is no bank or card network to appeal to, and only you as the merchant could decide to reverse the transaction if he chooses to do so.

  1. Broader Market

Accepting cryptocurrency would open doors to a new market of mostly tech-savvy customers, often internationally. For example, a small electronics retailer reportedly sold $300,000 worth of products to customers in almost 40 countries when he started to accept cryptocurrency.

  1. Responding to Consumer Demands

Cryptocurrency is increasingly growing in acceptance and legitimacy, and there are more people who hold them and want to spend using them. From a business owner’s POV, accepting cryptocurrency would offer your customers another option to pay, especially to customers who value privacy and anonymity. This would gain you an advantage over other retailers who do not accept them.

However, dealing with cryptocurrency requires a certain level of technological know-how. There is quite a steep learning curve to understand cryptocurrency.

Accepting payments in cryptocurrency involves maintaining a digital wallet on digital currency exchanges and requires the user to have a certain level of familiarity with the cryptocurrency market.

On the other hand, the disadvantages of accepting cryptocurrency payments include:

  1. Price Volatility

Business owners need to convert cryptocurrency prices quickly and regularly due to its volatility. Ethereum, a cryptocurrency coin, started at around USD $1 initially during the first months it launched, and today, it is priced at USD $1,976.

Startups and businesses could use services provided by BitPay or Coinbase to protect against volatility. These services immediately convert digital currency to its value in cash in real-time when payment is made. Holding on to cryptocurrency might amount to speculative investment and could possibly risk your revenue stream.

  1. Security

Currently, cryptocurrency transactions are not 100% secured and there is no complete guarantee or security against cyber criminals from getting access to customers’ digital wallets. There is an average of USD $2.7 million of cryptocurrency assets stolen every day in 2018. To cover these risks, there are now insurers dedicated to insuring cryptocurrency risks such as Nexus Mutual, Bridge Mutual, Coincover, and Etherisc. The cryptocurrency exchange platform Coinbase, for example, keeps less than 2% of its customers’ assets online.

Regularly back up your data, keep your private keys safe, and turn on multi-factor authentication when logging onto your digital wallets. Some digital wallet companies such as Optherium also incorporate biometric face verification before granting users access to their digital wallets for added security.

  1. Regulatory Uncertainty

There is no universal law governing cryptocurrency since it is fairly new. Each country has different laws, and almost have no regulations concerning cryptocurrency.

Bitcoin, for instance, is recognized in Japan as a legal payment method. Business owners would need to be adaptable if they adopt cryptocurrencies as a payment method as rules and regulations are still evolving. They need to be up-to-date with laws concerning reporting gains and losses and taxation if cryptocurrency faces regulation in their countries.

3 Ways To Use Cryptocurrency in Your Business

So how might you use cryptocurrency in your business if you’re sold on the advantages of it?

Here are 3 suggestions that we have. You might think of more ways as you grow your business and experiment.

Paying Employees’ Salaries in Cryptocurrency:

Setting Fiat-Cryptocurrency Conversion Rate and Ratio

Companies considering paying their employees’ salaries in cryptocurrency could decide on a recurring date each month to set the fiat-crypto conversion rate. They could freeze this rate as the conversion rate for their employees’ payroll, even if the actual disbursement of salary is done at a later date. The market rate of cryptocurrency could be used as the conversion rate.

Business owners should consult their staff on the ratio of fiat to cryptocurrency that the latter prefer to receive. As different employees have different financial obligations, it would be more equitable than the employees have a say in deciding how much salary they would like to receive in cash and in cryptocurrency. Employees with a bigger risk appetite would perhaps agree to receive half of their pay in cryptocurrency, while others might take between 10%-20% of their net pay in cryptocurrency.

Choice of Cryptocurrency

Business owners could offer several types of cryptocurrencies for their employees to receive their salaries. They could provide options of the most popular cryptocurrencies (like Bitcoin, Ethereum), alongside their company’s own coin, if they own such cryptocurrency. Business owners should find a coin that suits their employees’ risk profiles. The employees could then keep the coins in their digital wallets or use different tools (for example MakerCDP) to liquidate their cryptocurrency.

Paying Suppliers in Cryptocurrency

One of the benefits of paying suppliers in cryptocurrency for new business owners is the speed at which cross-border payments take place. It usually takes a few minutes compared to several days using credit card payments, for example. Cutting out the middleman such as banks and credit card companies also mean lesser fees paid by business owners.

Furthermore, cryptocurrencies would offer greater liquidity than illiquid or exotic currencies. This is especially true in foreign markets that curtail the cost-effective flow of their own currencies internationally. To illustrate, it is much easier and faster for a business owner to pay his Estonian supplier in cryptocurrency rather than the Estonian Kroon.

The challenges that business owners might face in paying their suppliers in cryptocurrency could be from their own banks. Traditional banks have invested billions in building their cross-border payment infrastructure (such as the SWIFT network). These banks would be more inclined to maintain their relevance through their legacy (old, but still in use) payment systems. They might compete with the adoption of cryptocurrency payments by offering business owners faster processing times or lower foreign exchange rates when businesses pay their suppliers.

Cryptocurrency is also still trying to shed its bad image of being used for a wide range of illicit activities, which might affect the readiness to accept cryptocurrency payments among suppliers. Cryptocurrency and its blockchain technology have also yet to achieve scalability for cross-border payments due to their lack of liquidity, and the fact that they are privately run and not government-backed. They have yet to achieve the scale of the trusted payment systems of today such as ACH, FedWire and U.K. 's CHAP system, which are distinguished by their large payment volumes, established operating rules, known costs, security, and deep liquidity pools.

Pros: Cons:
  • Speed
  • Lesser fees
  • Greater liquidity
  • Competition from traditional banks
  • Association with illegal activities
  • Yet to achieve scalability

Issuing Cryptocurrency As Dividend

Is It Possible for Fiat-Based Companies To Issue Cryptocurrency-Denominated Dividends?

Yes, fiat-based companies could issue cryptocurrency-denominated dividends only if they mint their own digital currency and issue investors with cryptocurrency coins. They could not issue Bitcoin- or Ethereum-denominated dividends for instance, but could issue their own companies’ dividends when they mint their own cryptocurrencies.

Can Companies Create Their Own Cryptocurrency?

Yes, they can. Most companies or startups build their own cryptocurrency using Ethereum’s technology. The startups then raise funds through initial coin offerings (ICOs), which is the IPO of a blockchain-based company. In return for the money, the startups reward investors with cryptocurrency, either as a share of profits or as dividends. However, for a company’s cryptocurrency to take off and be successful, it needs to have a strong use case, i.e. actual use or application besides paying for goods and services.

Taxes on Cryptocurrency in Singapore

According to the Inland Revenue Authority of Singapore (IRAS), businesses that accept cryptocurrency for their remuneration or revenue are liable to normal income tax rules. Income derived from or received in Singapore would be taxed. Tax deductions could be applied too if applicable.

These are some of the guidelines from the IRAS regarding cryptocurrency:

  • If your business accepts cryptocurrency payments in exchange for goods or services, the value of that cryptocurrency must be recorded in Singapore dollars as part of your ordinary income.
  • If a business pays an employee in cryptocurrency, the payment is treated as a normal salary or wages and is taxable.
  • If you mine bitcoins, any profits you make must be declared as assessable income.
  • As there is no capital gains tax in Singapore, profits from the disposal of cryptocurrencies are not subject to taxes.


If your business indeed adopts payments with cryptocurrency, do remember to be adaptable in your policies. This is because the laws and regulations regarding cryptocurrency are still being crafted, shaped by time and usage. If you need advice on how to account for your transactions with cryptocurrencies in play, reach out to us at Osome. Our experienced accountants in Singapore are always keeping updated on the latest development that affects digital businesses.

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