Crypto banking guide for small and mid-size businesses

Digital currencies are propelling the banking industry into a period of rapid innovation. As digital currencies continue to immerse themselves in the greater financial landscape, businesses incorporating cryptocurrencies are reaping the benefits from the forefront of this new revolution. This article addresses everything a small to mid-size business needs to know about crypto banking and how to leverage this new-age technology. 

What is crypto banking?

The term "crypto banking" refers to the management of one's crypto assets by a third-party financial institution. Similar to how traditional banks manage services pertaining to fiat currency, a crypto bank would manage all services relating to cryptocurrencies.

These crypto banking services typically allow users to hold a balance, make payments with a crypto debit card and earn interest on a supported crypto asset through crypto interest accounts, also known as crypto savings accounts. Some platforms might also offer loan services and crypto interest accounts, also known as crypto savings accounts.

Due to regulatory restrictions imposed on these fintech companies and the crypto market, it is common for these types of institutions within the financial sector to operate in certain jurisdictions like the United Kingdom or the United States of America. This is not uncommon for traditional banks either.

A crypto bank is not typically a crypto exchange, instead, it is defined as a fintech platform operating in the crypto banking space. Providing services for both fiat currency and digital assets, crypto banks are revolutionizing the financial institution sector.

What are the benefits of incorporating crypto into your business?

With over 320 million customers around the world shopping with cryptocurrencies, incorporating digital assets into your payment options allows you to tap into this broad group of consumers.

Additionally, the advantages of crypto payments outweigh fiat transactions in a number of ways, providing a more secure and faster means to send money across borders (or simply next door). These include:
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• More rapid transactions
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• More cost-effective transactions
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• Accessibility
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• Security
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• No chargebacks (all transactions are final)
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• Reduced fraud

Data suggests that an increasing number of businesses are starting to explore crypto payments, where employees can earn either their full salary or a part of it in digital assets in remuneration for their job. Some remote workers are even maintaining a career solely relying on crypto payments, hence the rise in crypto banks and crypto banking services.

Crypto banking, payment gateways, and businesses

Through crypto banking services or payment gateways, businesses are able to receive payments in digital assets and instantly convert them into fiat should they wish to do so. It's important to note that these services go beyond the services of that a normal crypto exchange might offer.

Some crypto service providers will allow businesses to make crypto payments directly from their account, however, until this becomes normalized business owners often chose to convert their digital assets due to concerns over volatility and cash flow. 

Below we cover the most pressing questions concerning small to medium-sized businesses incorporating crypto assets into their business models and how to effectively use crypto banking services to streamline this. 

Crypto banking services and small businesses 

Can small businesses use cryptocurrency?

Whether you’re conducting a few transactions a week or several hundred a day, cryptocurrencies provide an ideal payment solution. With minimal fees and no foreign exchange rates, accepting crypto payments is a cost-effective solution for small businesses, especially ones operating with a global customer base. 

By engaging in crypto banking services offered by a reputable crypto bank, businesses can manage cryptocurrency with the same ease as a traditional bank account.

Why do small businesses use crypto?

Small businesses will typically incorporate cryptocurrencies into their payment methods as a cost-effective solution as well as an opportunity to tap into a broader target market. With minimal transaction fees, short processing times, and heightened security, crypto transactions provide a perfect solution for small businesses. By adding crypto payments to their menu, many businesses are gaining an edge over their competition.

As crypto banks usher in a wave of innovation, small businesses now have the opportunity to circumvent the substantial fees tied to crypto exchanges. Instead, they can leverage crypto banking services that come at a more practical and affordable price point.

Crypto as a Business Expense 

Can crypto be a business expense?

For any size business, understanding the tax implications of accepting cryptocurrency payments is crucial. While it's important to understand the tax rules in your area, consulting a tax professional will likely be in your best interest. 

Businesses can also opt to incorporate crypto tracking software or crypto tax software in their business models to ensure that they are compliant. Please consult your tax professional regarding any questions you might have about being taxed on crypto in your country before engaging in any crypto banking or opening a bank account with a crypto bank.

Can I buy crypto as a business expense?

As each country’s laws on taxing cryptocurrencies differ, it's best to consult a tax professional in your area who can properly advise. While you don't need a degree in tax to manage a business, gaining an education on the implications of the taxation of cryptocurrencies will do you, as a business owner accepting cryptocurrencies, a world of good. Reach out to your crypto bank or look to crypto companies for recommendations.

Crypto as Business Endeavor

Can businesses engage in crypto?

Yes, it has become increasingly common for businesses of all scales to participate in cryptocurrencies. Due to the high returns that Bitcoin and other cryptocurrencies have presented over the years and their strong ability to store value, coupled with the increasing adoption of digital currencies as payment methods, many businesses have chosen cryptocurrencies as a viable opportunity.

With the increasing popularity of crypto lending, many businesses are utilizing their digital currency holdings to generate wealth. Operating similarly to traditional savings accounts, businesses can store their digital currency in an interest-generating account that provides returns.

However, before committing to cryptocurrencies, we encourage you to conduct thorough research on the topic and determine if it aligns with your business's financial objectives and business plan.

Can my LLC engage with crypto assets?

Limited Liability Companies (LLCs) offer a blend of advantages: access to the liability shield commonly associated with corporations and the tax benefits seen in partnerships or sole proprietorships. However, it's advisable to verify the cryptocurrency laws and tax implications in your region before entering into any crypto endeavors.

Businesses and Crypto Wallets 

Can a business hold a crypto wallet?

Yes, anyone can open a crypto wallet. When looking to incorporate cryptocurrencies or any crypto financial services in your business opening a wallet is a must. Consider what your business intends to do with the cryptocurrencies (i.e. will you be making daily transactions or storing funds long term) and choose an appropriate wallet. 

Paying Employees with Crypto

Can I pay my employees with crypto?

Yes, cryptocurrencies can be used to pay employees’ salaries in most countries. Before going ahead with the process ensure that you have done adequate research about crypto payments in your area and are familiar with the rules and regulations. I.e. some states require employers to pay the minimum wage in USD and the remainder in cryptocurrencies. 

Crypto and Business Operations

What is a crypto business account?

A crypto business account is an account from which a business can manage its cryptocurrencies. While crypto business accounts might vary from platform to platform, the basis is that the account will allow a business to buy and sell cryptocurrencies and hold a balance. 

How is crypto taxed for business?

Usually, cryptocurrency income is subject to regular income tax. However, a business should conduct sufficient research to ascertain the tax consequences of accepting and engaging with cryptocurrencies in your country. We always advise reaching out to a tax professional specializing in cryptocurrencies in your region.

How do I report crypto as business income?

Navigating the process of reporting crypto as business income involves understanding the specific tax regulations applicable in your region. Often, countries stipulate the use of specialized crypto tax forms for declaring such income. To ensure accurate compliance, it's advisable to consult a tax professional who is well-versed in cryptocurrency tax regulations. Remember, failure to appropriately report earnings can result in legal consequences.

Should my business start accepting cryptocurrency?

Incorporating cryptocurrency as a payment choice can potentially lead to reduced transaction costs, mitigate the risk of expensive chargebacks, and attract a more diverse customer base aligned with modern preferences. By doing so, you can enhance your business's security and extend its presence in the contemporary market landscape. However, it's crucial to evaluate whether accepting cryptocurrencies aligns with your specific business model before making a decision.

How can a business accept crypto payments?

In order to accept cryptocurrencies you will need to provide your wallet details or QR code in your payment options. Installing crypto payments into your online store is seamless and straightforward, simply find the appropriate plug-in or app compatible with your e-commerce platform. If this option isn't accessible, businesses can add the code from their wallet in HTML.