Excerpt
I explore the journey of onboarding local businesses to bitcoin and address their common concerns about taxes, cash flow, and other implications of Bitcoin adoption in the business context. I emphasize the importance of education, support, and creating a strong community around Bitcoin. Learn how accepting bitcoin can provide a competitive advantage, reduce payment processing fees, and contribute to a circular economy. Discover the challenges and strategies for businesses to truly embrace Bitcoin and make it a successful tool for long-term growth.
Transcript
I am onboarding several local businesses and most seem interested, however, they all ask the same question: How do I handle the tax/cash side of the business when accepting bitcoin or Lightning? Is there a go-to answer for me? Should I keep it simple and say treat it the same as how you handle cash transactions, also potentially sell bitcoin if and when needed, or should I educate the need to have a total stack? So, I guess the person means with a total stack that it’s important to save bitcoin also within your company in the long-term. First of all, I find it great that this person or you are onboarding local businesses as they are the drivers of local economies. I think it’s important to show business owners the whole picture of what Bitcoin is and does, so please just don’t just go there and install a wallet for them, make a payment to them, and then leave them alone. This won’t work. People need someone to talk to, to ask questions and have someone as a reliable source of knowledge in their community. Most people are beginners and also business people have no idea about how Bitcoin works and they need someone as a contact to get answers to their most important and pressing questions and that’s not only about what the theory or the idea behind Bitcoin is and why it’s important because I think they really need to understand Bitcoin, why it’s important and why it can also change their life because if they’re not really behind the idea they might stop accepting bitcoin very soon because that’s happening very often because there are the businesses start accepting bitcoin but then you don’t have any customers who want to pay in bitcoin so adoption has to start on both sides. First, you need businesses that are accepting bitcoin but then you also need people who are purchasing things with bitcoin otherwise there will never be a circular economy because it’s not happening from one day to the other. It’s a tedious process. Actually there’s a lot of work going into setting up a circular economy and so I think it’s really important that the business owners themselves understand Bitcoin, see it as a long-term savings tool, and understand the positive impact it can have on their economical situation. In general, what you also can tell them is that Bitcoin payments for a business can keep the business competitive. It’s innovative. You can open your business to more customers and also potentially lower your payment processing fees because if you have your own node set up and you receive Lightning payments then you have to maybe, if you use a service, you pay 1% of your fees, 1% of the profit you make or your income in fees to the Lightning node provider, for instance, which is much lower than the 3, 4, 5, 6% you pay for credit card processor. You can also look at circular economies like Bitcoin Ekasi or Bitcoin Witsand in South Africa. They are getting into the focus of international guests, Bitcoiners who want to go there to see how it works and who want to spend their bitcoin there. In May, by the way, I’m going to speak at Adopting Arnhem. Arnhem is a town in the Netherlands, in the south of Amsterdam and the city of Arnhem or I think it’s 50 or 60 businesses are accepting bitcoin since 2014, I believe. It’s the longest standing or oldest still existing Bitcoin circular economy in the world and I’m going to go there to do a keynote and I’m also looking forward to visit the different businesses and to learn what their experiences are, what their problems have been, and how they set up the whole thing. So getting back to your question, so I believe the best thing is if you had a business owner who is convinced of the positive sides of Bitcoin and also at the same time doesn’t only accept bitcoin but also pays their employees in bitcoin so that the employees then can go and spend their bitcoin in other shops so that this really becomes a money used in the area. So and then the question of how do I handle the tax and, sorry, the tax and cash side of the business, is there a go-to answer? So, no I don’t have a go to answer because tax regulations are different in every country also it depends on which kind of business it is. For instance, in Austria as a one person business I have to follow different tax regulations as if I had founded a corporation. So best is really to ask a local tax advisor who is competent on Bitcoin and the local regulations. In my experience, I can tell you that bitcoin is not seen like cash in in the business accounting because cash isn’t taxed like bitcoin for capital gains so I would also say it’s more comparable to a foreign currency because you also need to record the exchange rate and take that into consideration. So and then as a business most business owners have a problem with their relatively high volatility of bitcoin because that’s of course a problem if you’re running a business because you need to plan your liquidity and the amount you need to spend for your business to run your business and because if you earn in bitcoin, for instance, and three months later you need to buy new supply and the value of bitcoin has dropped in these three months 25% then you actually you have a problem as a business because you can’t spend the money on the goods you need and on top of that in Austria you need to pay capital gains tax on the bitcoin you hold old. Not only in Austria, in many other countries as well and you also need to pay income tax on the bitcoin you receive as a one person business. I’m speaking because I can only speak of my experiences and from my experiences with accepting bitcoin in the last years, I have stopped to be honest, accepting bitcoin with my business in Austria because it’s a tedious process and you also don’t want to run into the problem of volatility and that’s why understand why many businesses immediately exchange the bitcoin they are accepting into their local currency and many services who which offer payment services in bitcoin and Lightning for businesses are offering that service so they basically pay the local currency to the business. I don’t know why it’s so complicated, so why is it set up that way in Austria, for instance, that I have to pay first income tax and then capital gains tax but if there is a loss I can’t deduct the losses from my income tax, it’s not possible. So that’s very difficult for businesses. I don’t know if this is on purpose or just because the people who are make those tax regulations don’t understand Bitcoin or because they always just use the old regulations. Like the capital gains tax in Austria are basically the same as the tax on stocks for instance but Bitcoin is not a stock Bitcoin is both, it’s a long-term saving and it’s money so and on money like on cash you don’t have capital gains tax. So it’s very complicated so of course it would be great if there were more corporations who are using bitcoin also as a store of value basically as a backing of the company but then you need a business owner who really is convinced and knows what they are doing because otherwise if the value of bitcoin suddenly goes down the they might run the business into the ground so my thinking is also as a small business owner or a one person business I think it’s better to exchange the bitcoin you earn immediately to the local currency and then as a private person take your savings and exchange them to bitcoin because then you have a clear split between your company and your personal savings and that keeps the risks of the high volatility out of your business and with your personal finances it might be easier to estimate how much money you can put into bitcoin because you don’t immediately need it for for your life you, know. So yeah these are my thoughts on um onboarding businesses to bitcoin.
