The Bank of Canada has said that it is mulling the benefits of using electronic currencies, including bitcoin. But could Canadian companies benefit today? What should CIOs be telling their boards about cryptocurrencies?
Press stories have emerged about paying employees in bitcoin, but most CIOs shouldn’t be thinking about this, admits Anthony Di Iorio. That’s a bit disconcerting, given that he founded and currently heads the Bitcoin Alliance of Canada.
Di Iorio is a realist though. Before a company would consider paying its employees in bitcoin, it would need to ask itself some serious questions, he warns.
Bitcoin buy in needed
“Do the owners believe in it? Would my employees benefit from learning about bitcoin in order to get their salaries paid, and what is the real benefit for a company that isn’t involved in bitcoin yet?” he asks.
Di Iorio, who also runs a bitcoin-focused Toronto accelerator called Decentral, pays his employees in bitcoin. He only does so because he and his employees have a belief in the future of the digital payment network and currency.
Ultimately, unless your owners – and employees – are already bitcoin believers, it will be an uphill struggle, he warns: “There’s no real reason for a company that doesn’t accept bitcoin payment in things to offer bitcoin to their employees.”
Some companies are beginning to do just that, though. Online electronics firm NewEgg begain accepting bitcoins from Canadian users in May, for example, and is even offering bitcoin-only deals for Black Friday as part of a massive Bitcoin Black Fridayevent involving many retailers. Overstock began accepting bitcoin last year and now processes $15,000 a day in the digital currency.
Canadian firms accepting bitcoin include online electronics store BitDeals.ca, Best Sleep Centre, and a plethora of smaller business ranging from dentists, bistros, auto supply stores, butchers and beauty spas. There is a map of them here.
There are good reasons for businesses to accept bitcoin if they don’t already, Di Iorio argues. “It is the best use case to buy a good that’s shipped somewhere and to make those payments without having to be send your private information to someone, that will get leaked somewhere,” he suggests.
Even though credit cards in Canada use chip and pin technology, they are still inherently vulnerable for cardholder-not-present transactions, such as those made online. The Canadian Bankers Association showed an 11.5 per cent increase in this kind of credit and debit card fraud in 2013.
The Home Depot credit card hack has already affected Canadian customers, who are seeing a spike in credit card fraud.
Bitcoin benefits and tax issues
There are other fees that bitcoin can reduce too. One overhead lies with credit card processing.
Credit card fees have been fixed at 1.5 per cent as of April next year – a cut of 10 per cent – but many small business groups still complain that it is not enough.
International companies also stand to gain, Di Iorio says. “They can save 7-9 per cent like Overstock is doing right now because they’re not having to deal with currency conversions from country to country.”
Companies can take payment in bitcoin without actually holding any of it, by working with a bitcoin payment processor. Firms like US-based BitPay take payments in bitcoin and can then convert them to fiat currency so that the merchant doesn’t have to see the digital currency.
This will remove many of the problems outlined in this article on ITBusiness.ca, along with potential tax implications for Canadian firms, many of which may be nervous about dealing in bitcoin following murky CRA guidance on the topic.
Possible upside for CIOs
So, the first step for many companies will be to offer bitcoin as a payment option for customers, so that the merchants can take advantage of the cost and fraud reduction, Di Iorio says.
Paying your employees in it may be an option, if they understand how to set up a wallet and are prepared to deal with the tax issues. And there are companies to help you. Toronto-based online payroll company Wagepoint will take your fiat currency and use it to pay your employees in bitcoin.
But if you do that, your employees may be liable for tax, warns Ryan Lazanis, CPA, of Xen Accounting, which includes bitcoin service providers among its clients.
“There is very little guidance available on that subject because they haven’t even talked about this. [The CRA] say treat bitcoin like barter,” he warns.
There are distinct advantages in bitcoin for CIOs of companies dealing extensively in online sales. Those who aren’t considering it, and are perhaps scared away by the tax issues, should reconsider. But paying your own employees in it should be left to the evangelists.
