Cryptocurrency, Bitcoin, Ethereum. You have likely heard of these terms as cryptocurrencies, and Bitcoin in particular, have seen immense growth in recent years, the so-called “digital gold rush.” In 2021, cryptocurrencies, and digital assets generally, surpassed a $3 trillion market cap.[1] It’s estimated that approximately 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 cryptocurrencies can provide your company; and (ii) the process your company needs to establish to properly accept cryptocurrency.
If you are unfamiliar with cryptocurrency, you may be asking how it works and what it can do for your business. At its simplest level, cryptocurrency is digital currency, stored in a digital wallet, that relies on electronic blockchain technology. Blockchain, at its core, is a decentralized digital ledger that stores information about every transaction. Accordingly, when people buy, exchange, or spend cryptocurrency, those transactions are recorded on a blockchain.
So, why should your company consider implementing cryptocurrency into its business model? First, cryptocurrency may provide access to new clients who value transparency in their transactions. Second, cryptocurrency could provide access to new capital streams and asset pools. Third, and perhaps most significantly, introducing cryptocurrency into your company now may help position your company for a future that could include central bank digital currencies (which may arrive sooner than you think).
Indeed, following the 2021 digital gold rush, the federal government, thirty-seven states[3] and Puerto Rico have taken measures to “address risks stemming from the growth of digital assets and blockchain technology while supporting responsible innovation.”[4] On March 9, 2022, the federal government released an executive order setting forth “a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”[5] Similar initiatives are occurring at the state level. The Rhode Island General Assembly, for example, is considering House Bill 7254,[6] which, in pertinent part, establishes an economic growth blockchain act, regulates virtual and digital assets, and establishes depository banks for those purposes.
If you do decide to implement cryptocurrency into your business model, you will need to decide what role it will play in your company’s operations. Will your company hold cryptocurrency on its balance sheets, or will the company simply adopt crypto-enabled payments? The latter being the easiest and fastest entry into digital assets. Assuming your company adopts crypto-enabled payments, the actual process is somewhat straight forward. Generally speaking, you will have to create an account on a cryptocurrency exchange, such as Coinbase.[7] Next, you will have to add functionality to your company’s website (i.e., a QR code), so customers can send payment to your exchange account. Then, after receipt of payment, you will have 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 accomplished from your computer.
As with any new business opportunity, it is important to think ahead and prepare and engage in thoughtful discussion with business partners, legal counsel, tax advisors, and your information technology department. Readers are encouraged to contact Nick Arnold at narnold@apslaw.com or 401.274.7200 for a more detailed discussion surrounding the opportunities cryptocurrency can provide their company.
[1] The White House Briefing Room, Fact Sheet: President Biden to Sign Executive Order on Ensuring Responsible Development of Digital Assets (Mar. 09, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/
[2] Id.
[3] Heather Morton, Cryptocurrency 2022 Legislation, National Conference of State Legislatures (Mar. 17, 2022), https://www.ncsl.org/research/financial-services-and-commerce/cryptocurrency-2022-legislation.aspx.
[4] The White House Briefing Room, supra note 1.
[5] Id.
[6] H.B. 7254, 2022 Jan. Gen. Assemb. (R.I. 2022)
[7] Coinbase, https://www.coinbase.com/ (last visited Apr. 19, 2022).
