Bitcoin may be the largest and most well-known cryptocurrency but how many corporate treasurers seriously consider using it? More than you might imagine.

Some of the biggest names in the corporate world are already accepting bitcoin as payment for online products and services. According to one website, http://www.bitcoinvalues.net/who-accepts-bitcoins-payment-companies-stores-take-bitcoins.html the list already includes Amazon, Dell, Apple's App Store, Bloomberg and Virgin Galactic. Small-scale traders are also accepting it, from trendy coffee shops in New York and London's East End, diners in Tokyo and many more small businesses besides. The list is much, much longer and growing rapidly.

Some of the companies listed above are using services that make accepting the payment easier, such as electronic wallets and exchanges.

Potential benefits or risks of bitcoin

So should your company consider using it and what are the potential benefits or risks? Here are a few pointers for corporate treasurers to consider:

Bitcoin is an international currency and accepting it means that your company is open to trade with anyone anywhere in the world, without having to consider the intermediary step of having banks use their correspondent networks to transfer payments across borders.

Anonymity means no risk of a customer data breach

While transactions using bitcoin do have security weaknesses, the risk of losing customer data, or having it stolen, is not one of them. The only data the vendor receives is a unique code for each transaction. If the code is lost or stolen, so is the money associated with it. However, no customer-specific data is transmitted, so no bank account details, names, etc. (although these may be traceable if the customer uses a bitcoin wallet or exchange). While this is not a particular advantage for most companies, there may be some businesses that wish to give their customers this added level of anonymity.

Volatility

Bitcoin is a highly volatile currency so it makes sense to exchange any bitcoin the company receives into another currency at the end of each day. Good practice would be to sweep it into a US dollar, euro or yen account on a daily basis.

There is no fee for the vendor when receiving payments in bitcoin (although customers pay a small charge). This makes it an attractive alternative to card payments, which incur interchange fees (although these are now being lowered in the EU).

Irrevocability and counterpary risk

Payments are also irrevocable, which could benefit a business in which customers sometimes dispute a card payment after it has been initiated.

Since payments are irrevocable, companies need to have a robust security process for keeping the key for the bitcoin address (unique transaction code). It's common to store the key with a third-party custodian, however companies should consider the counterparty risk this entails. Companies should consider whether the custodian stores the private bitcoin keys on an Internet-connected server and whether there are internal controls in place, such as multi-signature wallets, to prevent theft.

Virtual currencies classed as property for tax purposes

According to the US Internal Revenue Service, in terms of taxation bitcoin is classed as property rather than a currency for federal tax purposes, so that general tax principles that apply to property transactions apply to transactions using virtual currency. Any loss or gain when you sell bitcoin should therefore be reported. However, businesses that accept bitcoin are likely to 'sweep' the currency into dollar each day, so losses or gains from movements in the bitcoin/dollar exchange rate would be minimal. There are also bitcoin exchange services that can generate reports that can be used for tax purposes.

Bitcoin can and should be integrated into the corporate compliance and governance systems, which means including it in account management software.