Is Crypto Safe for Everyday Use?

Cryptocurrencies have grown exponentially since the release of Bitcoin, which made them an international topic of interest in early 2009. Since then, more than 13,000 cryptocurrencies have emerged, and an estimated 16% of US citizens own and use one or more types of crypto.

Alongside the growth of these currencies, the ways they can be used have also grown. Many industries have opted to accept crypto as payment. These range from telecommunication giants like AT&T to companies in certain industries, like iGaming, where casinos.com has analyzed the leading mobile slot apps, many of which have begun accepting crypto to play.

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Despite this growth, many people remain cautious about using crypto as an everyday form of payment. Much of this hesitation surrounds the safety of using it, but it is also caused by a lack of knowledge regarding tax implications and other possible cons.

To shed some light on these concerns, we’ve examined the potential effects of using crypto as an everyday payment method and outlined the pros and cons of doing so.

Pro: Decentralization and Privacy

The main advantage to crypto from the offset has been that it is decentralized and operates using blockchain technology. This means that there is no intermediary (such as a bank) between you and the person or company you are paying—instead, your payment is processed by the blockchain directly.

This not only ensures the safety of your transaction, as it is written to a public and unchangeable ledger but it also reduces the risk of an intermediary stopping or querying the transaction and causing delays in payment. However, while the privacy of crypto is often touted, it’s important to understand how private your payments and receipts truly are.

Because no laws to regulate crypto existed when Bitcoin first emerged, transactions were entirely private and anonymous. However, many countries, including the US, have begun passing laws to strip this anonymity for security and to uncover how crypto is being used for illicit purposes.

As such, should your crypto ever go through an exchange due to being converted from or to fiat currency, your transactions will be available to law enforcement and can be traced to you. However, they still have the benefit of being entirely private should the transaction be legitimate and can have the perk of not clearly displaying where you are spending your money.

Pro: Fees

Besides the advantage of secure and (mostly) private transactions, crypto is also generally much cheaper than fiat currencies, which often require an intermediary like a bank or financial institution.

These intermediaries charge a fee each time they need to complete a transaction on your behalf. Depending on how much they bill you, these fees can quickly add up if you make many monthly transactions.

Because crypto cuts out the middleman, these fees can be avoided. Although almost every cryptocurrency also charges a fee for completing a transaction on the blockchain, these fees are minimal and are often considerably less than those charged by fiat currency institutions.

These lower fees extend to using crypto for international payments. These transactions, which commonly take an extended time to process and attract high fees, are almost instant with crypto and require much lower expenses. As such, crypto transactions are significantly better suited to those transacting across borders.

Pro: Inflation Protection and Appreciation

The final benefit of using crypto for daily transacting that we’ll discuss here is it offers unique protection against inflation, particularly in international markets. When dealing in cross-border transactions with a country with an unstable fiat currency, pricing may change hourly as the country’s inflation changes.

When transacting in crypto, even if multiple transactions occur daily, the value is protected against possible up or downswings of local or international currencies. This means that some protection is offered against paying more than you should.

Additionally, if you’re holding crypto in a wallet for everyday use, this crypto can quickly appreciate depending on how the market changes. What is in your wallet could suddenly become worth more, giving you more to spend. Unfortunately, the same is true in reverse, as crypto is extremely volatile, and you could also find yourself with less than you expected.

Con: Volatility and Risk

Crypto volatility is one of the largest disadvantages of using the currency for daily trading or payments. Although crypto generally remains almost stagnant within a single day, it has been known to have massive crashes that severely devalued certain currencies. Should this occur, your daily spending fund could shrink with little notice.

Aside from volatility, crypto also carries other unique risks. Among the greatest of these is having your wallet hacked or, worse, forgetting your unique key to access your wallet. Losing this information can leave you unable to access funds that you know you have and leave you with no recourse like you’d have access to when using a bank and fiat currency.

Con: Taxes

The most important argument against using crypto for everyday use is the tax implications it attracts. In the USA, the Internal Revenue Service (IRS) sees crypto as property. As such, any liquidation of crypto (or purchase made where you spend some of your crypto balance) could attract capital gains tax, even if you may not earn enough to file taxes.

What complicates matters significantly is that if your crypto has appreciated value since you purchased it, the tax on a transaction will change. If your coins have gained value that has held for less than a year, these gains will attract income tax. Longer-term gains (over a year) are given some relief and attract lower taxes.

Whether higher or lower taxes are attracted when transacting using crypto, extensive detailing of all transactions must be kept on record should the IRS request any information on them. Calculating your tax could also become complex enough to warrant hiring a tax consultant, which could render the savings on transaction fees redundant.

Conclusion

There are many unique benefits to using crypto for everyday use. Among these is that it is certainly safe and can save you considerable money on transactions. International payments are also much quicker and can stay anonymous unless law enforcement comes prying.

However, with complexities such as cryptocurrencies’ taxation and coin volatility, crypto may still not be ready for widespread everyday adoption. While this could change as more laws are passed, fiat currencies are, for the most part, still the best way to pay.