The first question to ask when considering using crypto in your company’s operations is:
Do we hold crypto on our balance sheet or simply adopt crypto-enabled payments?
To determine an appropriate path for your business, you should consider how it aligns with your business objectives. Consider the potential benefits, drawbacks, costs, risks, system requirements, and more. The following sections provide some broad considerations around two different paths as your company embarks on its crypto journey.
The first decision: hands-off v/s hands-on?
Hands-off means using 3rd party payment processors converting crypto to fiat instantly and crypto never touching the balance sheet. Quick implementation, but heavily dependent on vendor controls.
Hands-on means holding crypto, directly managing wallets, tracking basis, handling conversions yourself. More operational benefits, but more complexity.
Treasury perspective 🔍:
Hot wallets have become real-time capital allocation instruments for the treasury teams. Cold wallets for long-term holdings is straightforward.
The common pattern: convert volatile assets to stablecoins for treasury operations. You get settlement benefits without price volatility hitting every transaction.
But you still need to verify you’re not facilitating money laundering through foreign vendors, and OFAC compliance remains mandatory.
# Operational challenges:
– AML and KYC requirements.
– Robust processes to source and verify any crypto they accept.
– Third-party vendors should provide SOC 1 or SOC 2 reports.
– Regulatory responsibility still sits with your company, not the vendor.
# Tax and accounting considerations:
– For tax, the value of crypto is established at the time the payment becomes fixed and determinable. Establish the readily ascertainable fair market value of the asset at the time of receipt. That value is typically arrived at by using a block explorer or value aggregator.
– For accounting for crypto expenditures, when crypto is used as payment for expenses, the single transaction has two legs:
(1) the sale of the crypto and (2) the receipt of a good or service.
That second item, in turn, is accounted for as the noncash consideration on the sale of the crypto.
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