Hartford Business Journal

HartfordBusiness.com | March 22, 2021 | Hartford Business Journal 17 By Liese Klein lklein@hartfordbusiness.com N ot even 24 hours after launching a billboard advertising that District took Bitcoin as payment, a new client walked into the New Haven co-working space drawn by the ad. He ended up leasing a space — but paying with a credit card. "We didn't expect such a quick turnaround," Erika Stine, director of community and culture at District, said of the billboard. Although the client paid in a more traditional manner, he told her that he was attracted to the idea of paying with Bitcoin. "He wanted to be at the forefront of where it's happening — and that's District," Stine said. With Bitcoin and other "cryptos" or digital currencies constantly in the news in recent months, many small and medium-sized businesses are wondering if they should be entering the crypto space. Should they be accepting, transacting in or buying and selling digital currencies? What are the rewards and risks? The extreme volatility of many cryptos make their use as currencies an ongoing topic of debate. Bitcoin alone has swung so much in value that some analysts categorize it as an investment more than a means of exchange. But accepting Bitcoin or other cryptos with safeguards in place can have value beyond a simple exchange, as District and others have found. In addition to communicating that District is on the cutting edge, accepting Bitcoin tracks with the startup mentality of many of District's current clients, Stine said. More than 50% of the hub's tenants and members already invest in cryptos, she said, making the new policy a convenient option for them. "It makes sense for us," Stine said. "It was something that seemed a natural next step." Global reach Transacting in crypto also made sense to Adam von Gootkin, co- founder of Highclere Castle Spirits in Essex. His company has been selling its British-made product, Highclere Castle Gin, across the world in currencies including pounds, euros and dollars. XRP, currently the third-largest digital currency, has especially drawn the company's interest because of its wide adoption in Europe. "It speeds up international transactions," von Gootkin said of XRP. "Cryptocurrency is a big thing in the world right now in that it's really changing the way we think about currency and transactions." Highclere Castle Spirits recently announced that it was the first liquor company in the U.S. known to conduct a transaction in Bitcoin — exchanging about $2,000 worth of the currency with a distributor in New Jersey. The deal was arranged through Coinbase, a site with a commercial platform that holds the currencies in "wallets" that allow for the buying and selling needed to make transactions. The process was simple and the Bitcoin Highclere Castle Spirits received actually appreciated in value by 5% in the span of two weeks, due to the currency's recent hot streak, von Gootkin said. Most valuable, however, was how the Bitcoin transaction raised Highclere's profile and burnished its brand, von Gootkin said. The company's Bitcoin deal was covered widely in both the financial and liquor industry media, free publicity for the brand with appeal to a younger, tech- savvy demographic. "We thought it might be appropriate for us to lead the way and try something that hasn't been tried in the liquor business before," von Gootkin said. Although Highclere Castle and the gin business are centuries old, a new liquor brand requires modern appeal to sell. "We need to be on the forefront of technology and living in the future." Practical considerations It's simple to do business when transactions are dollars. But what if the instrument you are using fluctuates in value? "The challenge is that unlike when you receive cash as payment, when you are getting a digital asset such as cryptocurrency, any kind of time horizon where you're holding that instrument there's initial risk there of devaluation," said Asael Meir, CPA and partner with a technology focus at accounting giant CohnReznick. The biggest challenge when doing business with cryptos comes at tax time, Meir said. The IRS considers cryptos an asset that must be reported as "mark to market," a method of measuring the fair value of accounts that fluctuate over time. So that means recording exactly when any crypto assets are received and when they are sold. "It almost becomes a full-time job," Meir said. "Just tracking the activity of those transactions is an undertaking." But Meir added that just as Coinbase has evolved as custodian of crypto assets, he expects other technology solutions to arise soon to make accounting simpler for small businesses. And unlike six or seven years ago, when only tech-savvy firms like online travel agents took cryptos, accountants are seeing more and more brick-and-mortar businesses edging into the crypto space. Now is the time for business owners to familiarize themselves with cryptos and learn how to use them, Meir advises. "One day you may be able to transact a significant transaction or a real venture and you want to know how to do this using cryptos," Meir said. "If you've never transacted in cryptocurrency, I would suggest you get involved and get a feel for it. The concept of cryptocurrency is here to stay." Lagging adoption The complications of transacting in cryptos may be why adoption among small to medium-sized businesses remains low in Connecticut. Although dozens of ATMs across the state say they accept Bitcoin, only a handful of businesses show up on Coinmap, a site that tracks crypto acceptance. Among the few listed are Archie's Auto in Danbury, Ken's Clothiers in Southbury and Sakura Garden restaurant in South Windsor. Adoption by the state has also lagged: The General Assembly convened a working group in 2018 with the goal of making Connecticut "a leader in blockchain technology," but little came of the effort. Blockchain is the distributed- ledger system that underlies cryptocurrencies, allowing for secure peer-to-peer transactions without the involvement of a bank. But early adopters agree that as long as a business owner does their homework, transacting in cryptocurrency has a distinct upside. At District in New Haven, co- founder David Salinas has taken the next step into the crypto space, installing a Helium hotspot that allows his company to earn the Helium currency as users send data to and from the internet. "It's exceeded our expectations," Stine said of the hotspot's profits. For von Gootkin of Highclere Castle Spirits, transacting in Bitcoin and other cryptos is part of doing business in the 21st century. "It's all about doing the research and making educated decisions. In business in general, you have to have room to take a little bit of risk," he said. Do you take Bitcoin? Small CT firms ponder practicality of cryptocurrency transactions Erica Stine David Salinas Early Adopters These CT small businesses accept cryptocurrencies, according to Coinmap, a site that tracks crypto acceptance. • Sakura Garden, South Windsor • 7 Sins Lounge and Bar, Hartford • Ken's Clothiers, Southbury • Archie's Auto LLC, Danbury • Greg Moine Photography, Uncasville • E Z Stop Food Mart, Stratford • *The District, New Haven • *Highclere Castle Spirits *These companies are not listed on Coinmap but recently announced they are accepting cryptocurrencies from customers. HBJ PHOTO | STEVE LASCHEVER Adam von Gootkin, co-founder of Highclere Castle Spirits in Essex, recently did a deal in Bitcoin. FOCUS: Accounting

• Cover