As a business owner, you likely already have a few purposes for using crypto wallets. You may use them to store payments from customers, as a way to store and transfer company funds, or to manage employee payroll.
But did you know that some crypto wallets will make your business’ accounting easier down the road?
There are many options to choose from when it comes to crypto wallets. Some provide 1099 or other financial statements that you need to file your taxes correctly. Some can be a huge headache and end up costing you more money down the road. Below, we’ll dive into how to use crypto wallets, which crypto wallets make your business’ accounting easier later on, and why.
Want to learn more? Check out what your accountant will ask you about your crypto investments as well!
Four Different Types of Crypto Wallets
As a business owner, you’re used to handling various financial transactions.
But what about crypto and cryptocurrency wallets?
Crypto wallets store, send, and receive digital currencies, called crypto, like Bitcoin or Ethereum. There are four main types of crypto wallets: web wallets, desktop wallets, mobile wallets, and hardware wallets:
- Web wallets can be accessed through a web browser and are stored on a server.
- Desktop wallets are downloaded and installed onto a computer or laptop.
- Mobile wallets are apps that you can download onto your smartphone.
- Hardware wallets are physical devices that look like USB drives and store the user’s private keys offline.
Each type of wallet has its own set of pros and cons. For example, web wallets are the most convenient but also the least secure. On the other hand, hardware wallets are the most secure but also the most challenging to set up and use.
What to Look for in a Crypto Wallet
When it comes to cryptocurrency, you have a lot of different wallets to choose from. But which ones will make accounting for your business easier?
Here are a few things to look for when choosing a wallet for your accounting needs:
- Does the wallet provide a 1099 or other necessary financial statements? This can make tax time a lot easier.
- Is the wallet easy for you to use? You don’t want a wallet that’s difficult to keep track of.
- Does the wallet have good customer support? If you have any questions, you’ll want to be able to get help from the wallet provider.
- Is the wallet safe and secure? You’ll want to make sure your coins are safe and sound.
- Is the wallet affordable? You don’t want to spend more than you have to on a wallet.
These are just a few things to consider when choosing a wallet for your accounting needs. Do some research and find the right one for you. With the right wallet, accounting for your cryptocurrency can be a breeze.
Three Crypto Wallets That Make Accounting Easier
There are a few things to consider when choosing a cryptocurrency wallet that will make your accounting easier down the road. Perhaps the most important question to ask is whether or not the wallet provides a 1099 or other necessary financial statements. The best crypto wallets for accounting purposes are those that give you the necessary financial statements. Some wallets will provide a 1099 or other necessary information, but some don’t. This can be a headache to figure out later on.
But that’s not all. What other important factors should you consider?
Ease of use and security.
Coinbase
One wallet that gets high marks for both accounting ease and security is Coinbase. Coinbase is one of the most popular cryptocurrency wallets out there, and for good reason. It is user-friendly and provides a host of features that make it ideal for those looking to keep track of their finances. Perhaps best of all, Coinbase provides a 1099-K form for US customers, making filing taxes a breeze.
Blockchain
Another great option for those looking for an easy-to-use and accounting-friendly wallet is Blockchain. Like Coinbase, Blockchain provides a 1099-K form for US customers. It also offers robust security features, making it a great choice for those looking to keep their finances safe.
Armory
For those who place a premium on security, Armory is a great option. Armory is a bit more complicated to use than some other wallets, but it provides advanced security features worth the extra effort. In particular, Armory offers Hierarchical Deterministic (HD) wallets, which add an extra layer of security by allowing users to create a new address for each transaction.
No matter your priorities, there is sure to be a cryptocurrency wallet that meets your needs. By taking the time to find the right wallet, you can make your accounting life much easier.
Accounting Benefits of Crypto Wallets
As the world increasingly moves towards a digital future, it’s no surprise that cryptocurrencies have taken off.
What’s all the hype about?
One of the key benefits of cryptocurrencies is that they’re relatively easy to account for. That’s because each cryptocurrency has its own blockchain, which is a digital ledger that records all transactions. This makes it simple to track your crypto assets and ensure that your books are in order. That’s one big reason why we’ve seen so many businesses now turning to crypto wallets for their accounting needs.
Crypto wallets offer a number of advantages over traditional accounting ledgers:
- They are much more secure. For example, if your accounting records are stored offline with a crypto wallet, they can’t be hacked.
- Crypto wallets offer a more efficient way to track your finances. You have to input all of your transactions manually with traditional accounting methods. With a crypto wallet, all of your transactions get automatically recorded. This makes it much easier to track spending and spot potential problems.
- Crypto wallets can help you save money on transaction fees. With traditional accounting methods, you often have to pay fees for each transaction. With a crypto wallet, you only have to pay fees when you make a transaction, not for transactions going both ways. This can help you save money.
Overall, crypto wallets offer users a number of benefits.
The Drawbacks of Using a Crypto Wallet
While cryptocurrencies continue to gain popularity, there are still some significant drawbacks to incorporating them into your business’ financial management:
- Lack of regulation – Cryptocurrencies are still not backed by any government or financial institution, which means that their value can fluctuate dramatically. There is therefore no way to guarantee that a certain amount of money will be worth the same tomorrow.
- Cryptocurrencies are generally not accepted as legal tender. – This means that you cannot use them to purchase goods and services in many jurisdictions.
- Risk of cyber theft – Due to the decentralized nature of cryptocurrencies, they are often big targets for hackers and scammers. As a result, anyone thinking of using a crypto wallet for accounting purposes should make themselves aware of the risks.
- Not universally accepted – While most significant exchanges offer support for multiple currencies, not all do. As a result, it can be challenging to keep track of your holdings if you’re investing in a less popular cryptocurrency. Some currencies, such as Bitcoin and Ethereum, are more widely accepted than others.
- Currency limits – Not all crypto wallets support every currency. You need to choose a wallet that supports the currencies you’re interested in investing in.
While there are some drawbacks to using cryptocurrencies, they still offer a number of advantages over traditional monies. For businesses looking for a more secure and efficient way to track their finances, a crypto wallet is worth considering! However, if you’re not quite convinced that cryptocurrency wallets are right for your business, or want to learn more about how using them could impact you, just ask a friendly Remote Accounting Expert!
Book a free consultation with us to discover more about the options for managing your books.
