7 questions about cryptocurrency for entrepreneurs

What is cryptocurrency?

Cryptocurrencies are digital currencies based on blockchain technology. Basically, a large network of computers keeps track and monitors crypto transactions. To be able to pay with digital currencies, you must first have them. You can get them in several ways, but most buy them with fiat money. For example, with US dollars or euros.

What cryptocurrencies are there, where can you find them and how do you buy them?

The best known and most popular cryptocurrencies are Bitcoin and Ethereum. There are also thousands of other species. To buy and store this currency, you need a crypto wallet. You can compare this to a digital wallet. One of the ways to create a crypto wallet is to become a client of a crypto exchange. After that, you can buy the currency through the exchange’s website or mobile app. When choosing a crypto exchange, you must keep in mind whether the party is registered with the Dutch bank and whether your investments are insured against, for example, theft and phishing.

Cryptocurrencies, such as Bitcoin and Ethereum, have become quite popular in recent years. Both as a personal investment and a business investment. Are you also interested in buying, selling and storing digital currencies? Create a free account with the largest trading platform in the Netherlands: Bitvavo and trade the first €1000 without transaction costs.

What are the advantages and disadvantages of cryptocurrency?

Every transaction you make with cryptocurrency takes place instantly and worldwide without the intervention of a third party such as a bank. It gives you privacy. In fact, you are your own bank. It can also be a disadvantage. Because crypto is a decentralized and unregulated means of payment, you are responsible if something goes wrong. Did you accidentally transfer crypto to the wrong crypto address? Or have you lost your login information? Then you can often no longer pick up the digital currency.

Are cryptocurrencies safe?

Transactions are tracked by a network of computers, known as nodes. As a result, the system cannot actually be hacked. You are responsible for the security of your own crypto coins. You can store them in a digital wallet that you manage from your computer or phone. But for large amounts, it is safer to store them offline on a hardware wallet (a kind of USB stick). As long as you know your passwords, you can access your digital money anytime, anywhere.

Is it wise to accept crypto as a payment method as an entrepreneur?

If you operate in an industry where customers like to pay with crypto, it can bring additional revenue. Also nice: with foreign transactions you don’t have to take exchange rates into account. On the other hand, the price of crypto-coins (still) fluctuates a lot. It creates uncertainty. Despite the fact that more than 1.6 million Dutch people have invested in crypto, it is becoming more and more common in everyday life yet hardly used as a means of payment. The sector is relatively new and no one knows if crypto has a future as a means of payment. On the other hand, during the bursting of the internet bubble in the spring of 2000, there was also great doubt about the future of the internet.

Is crypto a good (retirement) investment?

In any case, not every crypto coin is a good investment. Last year alone, 5,000 new cryptocurrencies were launched. Most likely, most of these products will disappear again. But is the best-known cryptocurrency, Bitcoin, a good retirement investment? It depends on how much risk you want to take. With Bitcoin, you do not generate dividends or other income. Investors must therefore rely exclusively on price increases. Over the last 10 years, the value of a Bitcoin has fallen by 80% or more 3 times. But the value continued to climb to new record highs thereafter. No one knows for sure what will happen in the future, so it is always good to diversify your investments. It also depends on your age. For example, if you are young, you may have more risk because you have a long investment horizon. If you are older, it may be wiser to have safer investments.

Do you have to pay taxes on crypto as an entrepreneur?

Both companies and individuals are legally obliged to report holdings of cryptocurrencies as income tax to the Tax Authorities. You must convert the value of the currency into euros and include it in your administration’s income statement. If you, as an entrepreneur, are paid for your services or supplies in cryptocurrency, you must also state the amount in euros on your VAT return. Curious how exactly cryptocurrency accounting works? For more information, visit the tax authorities’ website.

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