I'm not a silly investor': SMEs accepting cryptocurrency as payment

I'm not a silly investor': SMEs accepting cryptocurrency as payment

When Robert Tadros was asked by a client last year if he would accept cryptocurrency as payment, he was “quite taken aback”.

Being a believer in blockchain technology and a crypto-investor himself, the founder of search and social agency Impress!ve Digital was open to the request.

“It’s an online store that the client operates. He was paying for his stock in cryptocurrency. So I embraced the idea.”

Cryptocurrency client base increases

In 12 months, Impress!ve, has grown 500 per cent from $600,000 to $3.5 million in annual revenue. Tadros attributes this growth to pivoting from a being a generalist agency to specialising in SEO, SEM and Facebook advertising.

Three of Impress!ve’s clients pay in cryptocurrencies. “Our clients are on a monthly retainer over a contractual period of generally six to 12 months and they make the monthly payments in full – in cryptocurrencies,” he says.

Impress!ve accepts payment in Ripple, bitcoin, litecoin and ethereum.

Tadros says: “I had to jump through hoops with my accountant to get this over the line. Given that I am a crypto-trader for the last several years, I was willing to take the risks. I'm not a silly investor. Our cryptocurrency sits in a dedicated wallet which was set up for the business. And I understand the volatility of cryptocurrency, but eventually it does even out.”

He says the company does its due diligence. “We have given ourselves a bit of a buffer. We've taken into consideration the volatility of the market and how frequent the actual exchange goes up and down," he says.

“We are very selective also with the clients that we offer this to. We do have a limit as to how much we can actually accept in cryptocurrency and that way it mitigates the risk of losing too much money.”

He says Impress!ve has also made educated decisions around which cryptocurrency coins it accepts.

Tadros says there's a huge community in the cryptocurrency world. “I feel that this would open up a lot of doors to us.

“A lot of businesses, especially in the SME sector, can’t or don't have available funds for marketing services. So what it allows them to do is still get the marketing services utilising another form of payment. Which in turn obviously increases their leads, their revenue, and their sales.”

Travel agency embraces crypto

Brisbane-based start-up TravelbyBit has its hands full with cryptocurrency deals.

“You can book your holidays overseas through us and pay by cryptocurrency. We attract international visitors to Australia who want to pay in cryptocurrency. And we direct them to businesses and hotels and travel providers who take payment in cryptocurrency,” co-founder Caleb Yeoh says.

“On top of that, we are also a payment provider. Businesses who want to take payment in cryptocurrency come to find us. We provide a payment gateway that allows users to pay in cryptocurrency and then we give the businesses the option to keep the cryptocurrency or change to Australian dollars.”

Yeoh estimates that over $3 million worth of cryptocurrency payments are made each week in Australia.

TravelbyBit charges a set-up fee for its payment service. “It’s $100 onwards, depending on the size of the business.”

Yeoh says the company started in September, “but our turnover is about $70,000 already. We are going through a fundraising round to scale up our operations.”

Of that amount, he says, 70 per cent has been in cryptocurrencies.

He says the company’s system is facilitated by blockchain-enabled payments. “We currently take payments in bitcoin, dash, ethereum and litecoin, and we are looking at integrating with XEM payments, which is enabled by the NEM blockchain. XEM is fast and can go up to 4000 transactions per second. That’s why we are looking to integrate with them.”

TravelbyBit has more than 70 active merchants. “We have 40 in the pipeline. We have an average of three merchants requesting to sign up every day to join our network.”

Yeoh’s agency recently partnered with Brisbane Airport to make it the world’s first digital currency airport. “Most retail shops at the airport will soon be able to take payment in cryptocurrency. International travellers could come and pay with bitcoin, dash, litecoin or ethereum without the hassle of exchange rates. You can buy your duty-free goods, have a beer or a coffee and pay in cryptocurrency.”

For the love of burger

 

Crypto is just another form of payment for #burgerlove, a Melbourne fast food chain that hopes to expand to the rest of the country.

“We spoke to the Blockchain Centre in Melbourne which runs the NEM system and they helped us to create a platform that would allow customers to make everyday purchases using cryptocurrency,” says Steve Agi, the founder of #burgerlove. “It's no different to paying by eftpos or by cash.”

XEM, which is part of the NEM platform, is its major currency. “But we also accept bitcoin, litecoin, dash, nano.”

#burgerlove even has a dedicated crypto menu, Agi says. “We have the NEMBurger, the Bitcoin Burger, they are named specifically for the crypto audience. They can also buy any burger off the menu with crypto.”

For a business like his, currency fluctuations are not a huge risk, Agi says. “At the moment, it's not very big because we only get a very small percentage of customers buying burgers with crypto. If crypto were to be say 50 per cent of our business, it would become a very risky venture if we didn't have safeties in place to ensure that we were able to work through the fluctuations.”

Agi says there are a lot of benefits to using crypto. “I think the main one is that the fees are a lot lower or non-existent really compared to banking fees.”

Last financial year, #burgerlove had three stores and turnover is about $5 million.

Agi says the company started accepting cryptos in late 2017. Currently approximately 1 per cent to 2 per cent of sales are in cryptocurrency.

What are the tax implications for SMEs?

 

Mark Chapman, director of tax communications, H&R Block says: “If the client receives cryptocurrencies for goods or services provided as part of a business, they will need to record the value of the cryptocurrency in Australian dollars as part of ordinary income.

“Where the client carries on a business and purchases business items (including trading stock) using cryptocurrency, the client is entitled to a deduction based on the arm’s length value of the item acquired.”

Chapman says there may also be capital gains tax consequences where a client disposes of cryptocurrency as part of carrying on a business.

For any business that is taking cryptocurrencies as a method of either getting cash in for sales or using it to pay for purchases, the tax obligations are essentially the same as with any other business, he says.

“Essentially, all the basic obligations any small business has will also apply to a business that accepts cryptocurrencies or deals with cryptocurrencies either in its sales or its purchases or both,” he says.

Chapman says small businesses going down this road need to be vigilant about record-keeping.

“If you are trading and accepting cryptocurrency and also accepting Australian dollars, effectively you are going to have to have two sets of books - one of them recording the Australian dollar transactions and one recording the crypto-transactions.”

He says, ultimately, the records for cryptocurrency sales and purchases need to be translated into Australian dollars to enable reporting to the Tax Office.