To use their ill-gotten cash, criminals must make it appear legitimate. That’s the job performed by money launderers, who increasingly use cryptocurrencies. According to digital currency analytics company Elliptic, crooks use them to launder $3 to $4 billion per year. With over 4,000 digital currencies to choose from, they gain access to a liquid asset that’s cost effective and usually untraceable.
But cryptocurrencies may also have something to offer legitimate businesses. Let’s look at the pros and cons.
Some banks deny customers the ability to deposit digital currencies. They often cite laws that make it illegal to process cryptocurrencies, concerns about security and a lack of infrastructure to support such transactions.
But even though banks are reluctant to embrace cryptocurrency, there are some potential benefits for businesses. For example, if you accept cryptocurrency, it can:
- Provide another way for customers to purchase goods and services, which could generate revenue you wouldn’t otherwise realize,
- Enable you to avoid the fees charged by banks and credit card companies to use their payment networks, and
- Prevent transactions from being cancelled or charged back to you once the cryptocurrency payment is final.
Understanding the risks
Of course, there are also risks associated with accepting payment in cryptocurrency. One is the fact that digital currencies fluctuate in value — sometimes wildly. This can work in your company’s favor if the price of a currency increases. But it can also lead to big losses if the price declines.
What’s more, you should know that government regulation of cryptocurrency continues to lag — making the future of oversight unpredictable and subject to change. And digital wallets used to hold cryptocurrency aren’t necessarily secure and could be compromised by sophisticated criminals. Law enforcement is constantly working to improve its ability to monitor these transactions, which includes seizing payments connected to crimes.
Maintaining your wallet
Although all of these risks demand your attention, probably the most pressing challenge facing businesses relates to the maintenance and security of digital wallets. Before you decide to accept cryptocurrency payments, make sure you thoroughly understand how digital wallets — and price fluctuations — work.
We highly recommend you confer with your Miller Kaplan advisor to understand your specific situation and how this may impact you.