Bitcoin for Business

Introduction

As a small or medium sized business owner or executive, you may have heard about Bitcoin from your peers, employees, or customers. This guide assumes you have a basic understanding of Bitcoin, this is not an explainer of Bitcoin. (Here are some other resources for Bitcoin introduction)

Bitcoin is a journey for individuals and businesses, you will not learn it all in one setting and you will mature in your understanding, adoption, and benefit from Bitcoin. There are risks that must be mitigated, often the mitigation is through knowledge, sound operational practices and controls, and corporate governance. Bitcoin is not just a technology, it's a new way of doing business.

What can a business do with Bitcoin?

There are several things a business can do with Bitcoin:

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• Accept Payments from Customers
• Make Payments to Employees with Bitcoin
• Make Payments to Vendors Suppliers and Contractors
• Hold Bitcoin as an Asset
• Borrowing against Bitcoin holdings
• Create a new line of business

Let's walk through each of these. But first, a foundational element in all of these use cases is to be able to secure and control your company's Bitcoin, protecting both from external and internal unauthorized users. You will need to invest time and resources into governance as Bitcoin is a bearer instrument, just like paper cash currency. Companies should implement a multi-party security setup, either using a Bitcoin consultant to help design a program or enlisted the help of Unchained Capital or Casa, both companies who have deep expertise in multi-party security for family offices or companies. This security is implemented with multiple signature wallets, or "multi-sig" for short.

Accept Payments from Customers

There are several ways to accept payments. In a more manual setup, you can provide your company Bitcoin or Lightning wallet address to a customer via a secure channel. This is acceptable for periodic or low volume transactions. If you are in an eCommerce or self-service business model, you want an online way to accept Bitcoin or LIghtning without intervention. In this case you want to setup and run a BTCserver. This is a little more complicated and you may need help to get this up and running. In either a direct transaction or BTCserver, you need the funds to go directly to your company multi-sig wallet. You will need to consider whether to convert to a stablecoin, US Dollars, or remain in Bitcoin depending on your cash flow situation and your tax obligation. Note, at the point of receipt is your cost basis for your Bitcoin. Consult your tax advisor for the implications of this.

Make Payments to Employees with Bitcoin

Making payments with Bitcoin can establish you as a leading edge company with your employees and potential recruits. You may be seen as concerned about the financial well being of your employees. In most ways, paying employees in Bitcoin is the equivalent of setting up direct Deposit for your employees. In fact, if you don't want to be that channel, you can advise your employees how to set up automatic Bitcoin purchases with Swan or other channels. An early service in this space is Bitwage who helps employers set up automatic payroll payments in Bitcoin. Of course, you could take a more manual process to pay from company wallet to employee wallet directly, but you'd have to take meticulous records which a service otherwise does for you. You could look at a service like PayStubCreator.net to handle this. BitPay Send and Living Room of Satoshi, payment platform in Australia are other options to explore for Bitcoin payments.

In case you are feeling too far out in front, know that this year Twitter, the City of Miami, the City of Jackson, TN, the Sacramento Kings, and others have announced their exploration of Bitcoin payroll. You do have to understand Federal and state laws which may preclude direct payment in Bitcoin, so implement a program that is optional and opt in is in writing.

Another angle to support employees is a 401k program that allows for Bitcoin holdings. BitWage is one such company but there are many emerging options.

Make Payments to Vendors, Suppliers, and Contractors

This is simply a more general case of using Bitcoin to pay employees, but simpler as there are no payroll processes and taxes. The key here is clear communication with your vendors or payee on how they want to accept payment (Bitcoin or Lightning) and that you have accurate wallet addresses. If you are paying on an ongoing basis, your payee may want a new wallet address for each payment. Keep in mind any tax reporting you may be required to do based on your jurisdiction.

Hold Bitcoin as an Asset

There are many companies that can increase their value and can grow there assets by buying Bitcoin for US Dollars (or accepting Bitcoin and holding it as described before). There are many, many resources on buying Bitcoin. The uniqueness for a Company, rather than an individual, buying Bitcoin is the governance around buying it and the technology and procedures to secure it. In terms of governance, if a company has a Board, they may well need Board approval to follow this path. Companies may consider hiring a consultant or working with a company such as Swan who has experience helping companies purchase Bitcoin. LIke any asset, the company must have clear controls about holding assets so no insider or outsider can gain control of the funds without authorization.

Borrowing against Bitcoin holdings

There are emerging ways of putting your Bitcoin capital to work. As this is still an emerging capital investment approach, a company should not start this without gaining a greater understanding of the market. The biggest risk is the loss of capital for sudden changes in the market. Some examples of companies that offer this are BlockFi, Ledn, and Gemini Earn.

Create a new line of business

Bitcoin and especially the Lightning Network enable more frictionless commerce, especially across borders. This may open new opportunities for businesses to expand their current lines of business or develop whole new ways of going to market.

Risks to Businesses

There are several risks businesses must evaluate and mitigate. If a business holds Bitcoin in a wallet, security and governance are key areas to explore. Unauthorized access to private keys (i.e., control of the Bitcoin) is a critical risk to understand and protect against, both from insiders and external entities.

Governance

Companies have existing policies and procedures on investments and cash management. Using Bitcoin in the business may require this policies to be evaluated and revised.

Mindset for Learning Bitcoin

You may get to this point and wonder if Bitcoin is for you. Bitcoin is such a dramatic change to the way financial transactions and assets work, you have to bring a broad, learning mindset.

Here are some facts and considerations to put you in the right mindset to learn about Bitcoin:

• Some things we hear as truths and take for granted may turn out to be not true
• Financial systems do not last forever. Every 100 years or so, there are global changes to how financial systems work
• The financial and monetary system we live under today is not the same one as when the country was founded. It has evolved in significant ways including going off the Gold Standard
• The US Dollar does not have to be the global reserve currency. When the US Dollar was first released, it was not the global reserve currency
• The US Dollar started as a currency based in Gold. It was a Hard currency, meaning that the rate of growth of the outstanding currency is relatively low. The current US Dollar is soft money, meaning that the amount of money circulating is increasing rapidly (the currency is being "debased")
• Not everything about our current system is good. The US Dollar being the global reserve currency has lead to war over land and oil.