Starting a business is never easy, and this is especially true if you would like to start a cryptocurrency business. This is because even though they have been around for about 15 years now, cryptocurrencies are still a relatively new concept to a lot of people. Cryptocurrencies are special because they have the potential to disrupt money as we know it while offering those who trade or invest in great profits. If you believe in what cryptocurrencies stand for and aim to achieve, a cryptocurrency business might be for you. To help you get started, we have compiled a list of things you should know below.
Gain Some Tech Skills
A lot of people who go into the cryptocurrency business have no interest in becoming developers. However, even if you want to be an investor, broker, or general cryptocurrency entrepreneur, you need to know what is going on in your market. This is why tech skills are so important.
Understanding how distributed ledgers work, the Ethereum protocol and a fundamental understanding of market analysis will go a long way in helping you in your new business. Additionally, you might have to talk about technicalities with investors or partners or have to understand what is going on via the platforms you choose to trade-in. In both situations, an understanding of the underlying tech, even without a deeper understanding of all the buzzwords, will help.
Ensure You Meet all Licensing Requirements
It is true that cryptocurrencies, as well as their trade and exchange, are not regulated by the government, your business will need to be licensed. It is important that you get in touch with a lawyer so they can explain to you the licensing you will need for your new business.
Furthermore, it is also important to do some research to find out whether you need to be registered as a money business in any capacity in the territory or province you live in. Remember that even in places where you do not have to register as a money service, the rules and regulations might change in the future and you need to be prepared for when you will require such licensing.
Other things to think about are adherence to Know Your Customer rules and regulations and have a way of verifying the identities of the customers you sell to or buy from if you are considering starting an exchange business.
You Should Work on Your People Skills
It bears repeating that cryptocurrencies are very risky and volatile, especially for new entrepreneurs and investors who do not know much about these digital assets. However, you might still need an injection of cash to start your cryptocurrency business and so you should have some people skills to attract finding or to get some loans.
One thing we would like to advise against is starting your own token. While it is true that it has become easier than ever to do so, it is not the best route to follow. It requires a lot of capital investment, time, and skills that you may not be open to acquiring. Additionally, the personal and financial risk of starting a token that fails, which is likely due to the sheer number of coins and tokens already available in the market, is not worth it.
The bottom line is that you will need to talk to people and make some presentations if you would like to attract investors and people skills will be very helpful in these cases.
You are Required to Pay Tax
Cryptocurrencies attract either capital gains tax or business income tax. Capital gains tax is placed on individuals who hold and then sell their cryptocurrencies for a profit. To pay capital gains tax, which is a lot more forgiving than business income tax, an individual has to ensure they do not engage in crypto trading as a business.
For entrepreneurs who want to start their own cryptocurrency businesses, they need to understand how business income tax on cryptocurrencies works. Business income tax on cryptocurrencies is charged when you trade or exchange cryptocurrencies as a business. Since you likely have funding or have taken out a loan, advertised your products and services, and have a business plan, you are expected to pay business income tax on the cryptocurrencies you sell.
However, it is also important to remember that you can also report a negative business taxable income if you sell cryptocurrencies at a loss. This often happens when you exchange two cryptocurrencies that have very different Canadian dollar values. For these exchanges, you first need to convert the values of the two cryptocurrencies into Canadian dollars and then do the calculations.
For a better understanding of how cryptocurrencies are taxed in Canada, see this guide on crypto tax in Canada by Wealthsimple. Wealthsimple provides tools that make it easy to invest, grow and manage your money. Their Wealthsimple Crypto tool is great for businesses that want to buy and sell crypto at the best rates, instantly. Their expert financial advisers are also standing by to help businesses and investors whenever they have questions or need any assistance.
Be Open and Ready for Changes in the Market
Whether you are mining, trading, or exchanging, you should be open and ready for changes in the market. The most successful people in the crypto space are where they are today because of their ability to adapt rapidly to changes in the market and industry.
The main challenge is that there are very few people who know what is coming down the line and if you do not adapt quickly, they will take your market share and your competition will move faster than you do. Remember that the market might turn chaotic at any time and this will require that you can move quickly while putting a lot of work into your business to ensure it is successful.
Lastly, you should be willing to experiment, whether it be with new revenue streams, products, services, and innovations. This is one of the best ways to stay ahead in a market that is constantly changing. It is also the best way to ensure your competitors do not end up cannibalizing your market share.
Choose a Suitable Payment Provider
If you run an exchange business or transact large volumes, you need a payment processor that will offer you favorable terms. No two payment processors are equal, and the fee structure will change from one provider to the other. Ensure that the payment provider can either give you a very low rate or they can provide you with a custom payment structure as you will be doing a lot of business through them.
If you are getting into the mining business, then your bank should be sufficient. This is because you only need to receive money when you complete a block and not as frequently as you would with other business models.
Remember to also check that the payment provider you choose provides adequate security. Remember that there will likely be a lot of money at stake once you start your business and you do not want to lose any of it through a cybersecurity lapse.
Protect Your Business
Even with your payment provider doing what they can to protect your money, you also need to protect your business. This can be through the use of cold wallets for storage, encrypted databases, and two-factor authentication for everything. These security measures are especially important if you will be managing and investing other people’s money.
Cryptocurrencies have become a target for cybercriminals and because many cryptocurrency businesses now have robust security in place, cybercriminals are looking for softer targets. Do not make your business a target by not putting measures in place to protect it, yourself, and your customers.
Learn to Gauge Your Risk Tolerance
Cryptocurrency businesses exist in a high-risk, high-reward space and so it is not for those who cannot take adequate risks. Blockchain is so challenging because it is unregulated and vulnerable to market swings. However, if you can learn to keep your risk levels lower than average, you might be able to protect your business.
If you see cryptocurrencies as being too risky, you can try diversifying into other asset classes. Such diversification can help balance your risk and ensure that even when cryptocurrencies are experiencing some volatility, you have some stability on the other end. These additional asset classes can also be a value add-on if you deal with clients. They might appreciate you taking measures to protect their money and investments, which can lead to additional business.
If you want to start a cryptocurrency business, you need to understand that even though the industry is highly rewarding, it is a very risky one. Ensure that you start on the right foot by having the necessary licensing and an overall understanding of how cryptocurrencies work. Also, ensure you protect yourself and your business by keeping your risk low and ensuring your cybersecurity is taken care of. Lastly, understand how factors like taxation and market volatility might affect your business and have solutions to any problems that arise in mind.