Blockchain and cryptocurrency have been gaining attention. While blockchain provides secure accessibility between businesses, cryptocurrency ease businesses to conduct a transaction. For instance, a cryptocurrency transaction can reduce your transaction fees, improve customer access, and become a good investment. No wonder, more and more businesses start implementing cryptocurrency transaction to their business. Some giant companies that already implement cryptocurrency transaction as payment are Wikipedia, Microsoft, KFC, Overstock, Amazon, and many others.
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However, although we might be already familiar with such digital payment, there remain challenges when implementing cryptocurrency to your businesses. The current challenge, for example, is the volatility in value. Albeit cryptocurrency is notoriously volatile that makes it attractive for businesses, it can also be dangerous for businesses to accept it as payment. In 2017, the price of Bitcoin rose from under $1,000 per coin to nearly $20,000 over the course of 12 months. Today, however, the price has levelled down. Due to this reason, most businesses automatically convert payments to fiat. Companies that keep payments in a form of cryptocurrency are essentially taking a risk that comes with coin investments.
Other challenges you will encounter when doing a transaction in the form of cryptocurrency are limitation and taxation.
Bitcoin is a peer-to-peer payment as it is done virtually. It is also the most convenient way to conduct cross-border transactions with no exchange rate fees. But do you know there are some countries that say no to Bitcoin transaction? The reason is that cryptocurrency is volatility, decentralised nature, and perceived threat to current monetary systems. It is also seen to illicit activities like drug trafficking and money laundering. Countries that ban Bitcoin are China, Russia, Vietnam, Bolivia, Columbia, Ecuador, Indonesia, India, Morocco, and many others.
One of many questions that arise from allowing investments in and the use of cryptocurrency is the issue of taxation. Allowing business or individuals to invest in cryptocurrency will need further understanding of whether cryptocurrency is a property or a currency. A report by the Law Library of Congress cited that the categorisation of cryptocurrency and the specific activities involving them for purposes of taxation will be a challenge. This matters primarily because whether gains made from mining or selling cryptocurrencies are categorised as income or capital gains.
The countries surveyed in the report, however, have categorised cryptocurrency differently for tax purposes. For instance, in Israel, cryptocurrency is seen as an asset. Therefore, cryptocurrency money will be taxed the same as an asset. Differently, in Bulgaria, cryptocurrency is charged as a financial asset. In the United Kingdom, cryptocurrency will be taxed differently according to who owns the coins such as corporation pay corporate tax, unincorporated businesses pay income tax, while individuals pay capital gain tax. Therefore, to keep track of this complex and evolving regulatory taxation, you should seek advice from your financial and tax advisory.
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