Who cares about your company’s crypto decisions?

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As retailers and other businesses consider accepting cryptocurrencies as a form of payment, the security teams of these organizations should be involved in the process of selecting the payment platform and securing wallets, according to experts.

For youth clothing brand PacSun, accepting cryptocurrencies for payments was a good way to reach Gen Z buyers. Through a partnership with cryptocurrency payment service provider Bitpay, PacSun is taking supports 11 cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, Dogecoin, and Litecoin, as well as Coinbase, Gemini, Binance, and other cryptocurrency wallets. The fashion retailer joins a growing list of companies that now accept cryptocurrencies, such as PayPal, AT&T and Overstock.com.

Instead of trying to hold onto cryptocurrency, most of these companies rely on cryptocurrency payment platforms to handle payments. That’s why companies should work with their information security teams to carefully assess the reputation and cybersecurity practices of these platforms before selecting a vendor.

When considering which platforms to use to handle cryptocurrency payments, ease of use is especially important for the overall cryptocurrency experience, says Luke Stokes, CEO of the Foundation for Interwallet. Operability (FIO). Beyond that, merchants need to consider other factors, such as whether the platform can serve their volume of customers, what type of cybersecurity protocol does the platform have, whether the vendor has been hacked in the past and how the payment platform addresses vulnerabilities, Stokes says. .

“Just as you would with a PCI-compliant environment in which you accept payments, you should follow very similar security best practices to ensure that the website itself on which you collect payments is not. not hackable, ”says Stokes. “It’s very similar to any kind of payment infrastructure decision: ‘do you have very secure systems? But then it takes it a step further, saying, “Do you want to be your own bank or not?”

One of the most important questions companies should ask themselves before accepting cryptocurrencies is whether they want a non-custodial wallet, which means they will control the key to their cryptocurrencies. , or a custodian wallet, where a third-party service provider will monitor their keys, Stokes says. The original premise of cryptocurrencies was to allow people to manage their funds without a middleman, but many companies or providers might be reluctant to become their own bank and prefer to work through a third party instead, Stokes explains.

For companies that choose to accept cryptocurrencies directly and retain control of their private keys, this poses a substantial security risk to that company’s cryptocurrency assets. But selecting a third party to manage the key to their cryptocurrencies creates a different risk profile, says Stokes.

Companies with non-custodial wallets risk being hacked or losing their keys, which could lead to the permanent loss of their cryptocurrency if they do not have adequate backup procedures. For businesses using custodial wallets, businesses could lose access to their cryptocurrency if that third party encounters issues, such as government actions or hacks, Stokes explains.

A necessary step businesses need to take is to adopt multi-signature wallets, which multiple users can access, Stokes says. They should also have cold wallets where cryptocurrencies cannot be accessed online and use air gap computers and hardware wallets, which require multiple people to access funds. It is also essential to perform full audit trails, that is, a record of all interactions with funds and portfolios, he adds.

Consider the risks PacSun chose BitPay to facilitate its cryptocurrency payments because the platform works with other large organizations, such as the Dallas Mavericks and Microsoft, says Mike Relich, co-CEO of PacSun. As the retail industry has to worry about ransomware, bots, and other cybersecurity issues related to e-commerce transactions, the company has started discussions on whether to accept cryptocurrencies in that spirit, said Relich.

Plus, cryptocurrencies don’t come with the chargeback risks that credit cards do, Relich says.

“Someone can use a fraudulent card, and then the person disputes, then the chargeback, and then we are responsible for the risk. Crypto is immediate. The minute this transaction happens – this is one of the beauties of crypto – it is finalized, ”says Relish. “So in fact, from a financial point of view, the risk is lower than taking a credit card.”

For businesses that do not have an e-commerce component, there are several considerations to accepting cryptocurrency payments. Allure Security, a company that detects and removes fraudulent websites masquerading as legitimate businesses, doesn’t have to worry about potential fraudulent transactions from strangers because the company knows the customers they work with, explains CEO Josh Shaul. When Allure Security sends its bills through Coinbase Commerce and accepts cryptocurrencies, the company knows exactly who paid for the service, Shaul explains.

Allure Security has decided not to keep the cryptocurrency. The company accepts payments using a Coinbase Commerce account and immediately converts cryptocurrencies to U.S. dollars, a process Coinbase Commerce has made quite easy, Shaul explains.

Allure Security chose Coinbase based on a customer recommendation and its positive reputation. It also helped that Shaul knew some of the people on the Coinbase security team. Shaul had no preference for which coins to accept, believing that accepting any new coin would be a good marketing tool to reach new customers.

“There’s some risk, I guess, that in the short time between when a customer pays their bill before we realize they’ve paid it and transferred the money to real money. , we might lose value, but I’d roll the dice for the fun market awareness that we might generate around us, we’ll take whatever crazy coin there is, ”Shaul said. “Coinbase is, I think, more pragmatic. They don’t want to face the biggest risk of fluctuations in their trading plan.

The Regulatory Landscape is Cloudy As companies try to decide whether or not to accept cryptocurrencies, lawmakers and regulators are still developing guidelines for cryptocurrency businesses. In the United States, Congress and the Securities Exchange Commission have yet to provide clear guidance on how to handle this new asset class, in part because it lacks the characteristics of currencies and existing asset classes, and our existing laws to regulate currencies and asset classes are almost a century old, says David Gold, one of the co-founders of the FIO protocol. The FIO protocol is an open source usability layer solution that attempts to make it easier to send, receive, and request cryptocurrency across the blockchain.

SEC Chairman Gary Gensler told lawmakers at a Senate hearing in September that the agency was developing rules for the emerging cryptocurrency industry.

Before the company decided to accept cryptocurrency payments, one of the questions for Allure Security’s finance team was how to account for cryptocurrencies in their taxes. But the company ultimately decided to do it by calculating the U.S. dollars converted from cryptocurrencies to U.S. dollars and transferred to their bank account, Shaul said. For now, he says, he’s not worried about the impact of cryptocurrency regulations in 2021 or 2022.

“There might be some exposure on the road which will cost us a little more than we thought. But for me, the sheer value of being able to transact with these companies the way they want and not introduce friction … that’s what matters to me, ”Shaul says. “We will deal with the regulations and everything that will happen when and if it does.”

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