Should Retail Jewelers Accept Bitcoin and Other Cryptocurrencies?
In the last year, few subjects have captivated public attention in the way that cryptocurrencies have. The most popular digital currency, bitcoin, has seen its value skyrocket to new heights in recent months, despite its notorious volatility. Propelled by increasing public awareness and a newfound willingness by established financial institutions and authorities to take cryptocurrencies seriously, rather than dismissing them as a fad, bitcoin and its many cousins offer us a glimpse into the future of money.
Yet despite bitcoin's steady progression into the public consciousness, if not yet the mainstream retail sector, many questions remain regarding cryptocurrencies' viability as a practical tool for trade: Should the average retailer start accepting bitcoin? If so, how can they securely exchange their bitcoin holdings for government-backed currency? What are the financial regulations surrounding cryptocurrencies? Will the volatility of these new currencies ever become manageable?
The answers to these questions will ultimately determine if bitcoin and other cryptocurrencies become widely-accepted forms of payment, or if they end up going the way of the tulip bulb. But regardless of what the future holds for crypto, many retailers still want to know if they should start accepting bitcoin today. With that in mind, here’s what retailers need to know about cryptocurrencies.
Cryptocurrencies and the Jewelry Industry
Compared with retailers in other industries, jewelers face an elevated risk of fraud, theft and misrepresentation of all kinds. In the context of a new and poorly-understood method of payment, these risks increase. Retail jewelers should be particularly aware of the risks surrounding cryptocurrencies, including volatility, liquidity and concerns about fraud, should they choose to accept crypto as payment.
The most obvious non-criminal threat to jewelers who use crypto is volatility. It's impossible to know how much a bitcoin will be worth in the next few hours, much less next week, a fact that exposes retailers who accept crypto to unpredictable fluctuations in the value of their holdings.
Of course, for those with an appetite for risk, accepting transactions in crypto is no different from, say, accepting shares in a company as payment for goods. Some financial regulators in Canada have indicated that they will treat bitcoin and other cryptocurrencies as securities in many cases, which makes sense, considering their volatile nature.
In terms of liquidity, converting bitcoin into cash requires the seller to sell bitcoin directly to a buyer. There are many online exchanges that connect bitcoin buyers and sellers; WikiHow even has a step-by-step guide on how to sell your bitcoin holdings.
Concerns about fraud related to bitcoin are generally limited to unscrupulous exchanges - which have been known to suddenly disappear, taking users’ bitcoin with them – and hacks. But while most examples of major hacks date from a few years ago, today even reputable crypto exchanges can cause panic when they suddenly go down.
When it comes to accepting bitcoin at a point-of-sale, several companies offer platforms that allow businesses to accept bitcoin from customers, one of which is the well-established Bitpay.
The Cryptocurrency Bubble
Bitcoin isn’t the only cryptocurrency out there. Many different iterations of the same concept exist, each of which has its own strengths and weaknesses. Some platforms, such as Ripple, combine a cryptocurrency with a payment remittance network. Other cryptocurrencies literally started off as a joke – only to become incredibly popular, and ultimately targeted for exploitation.
At this point, it’s clear that cryptocurrencies have entered their bubble phase. Once the bubble bursts, prices of crypto will fall and there will likely be a reorganizing of the current market. This eventuality adds one more layer of uncertainty to a commodity that is already a question mark for retail jewelers.
Rules for Users
If you buy, sell, or accept bitcoin or other cryptocurrencies, here are some rules you should follow.
One, be prepared to declare the value of your crypto holdings to tax authorities at any time, and keep close track of transactions made with crypto.
Two, use only reputable exchanges when making crypto transactions.
Three, remember that you are trading in what is essentially a stock – crypto is not currency, despite its name.
Four, remember that by using crypto, you’re supporting a technology that was developed to reduce society’s reliance on banks. If nothing else, maybe bitcoin can help us get rid of transaction fees – although, at this point, that looks unlikely.
Nathan Munn | Polygon.net
