If you want to accept cryptocurrency payments, you’ll need a strategy for your approach to managing profits. After factoring in your company’s overhead costs, the price you pay for goods and supplies, and your profit margins, you have to determine whether to lock in those funds at the fiat (US dollar) amount you charged or hold some of those profits in crypto.
Below, we discuss how to convert a large amount of crypto to fiat, what your options are, and the pros and cons involved.
How Do I Convert a Large Amount of Crypto to Fiat (USD)?
There are a few methods you can use to convert a large amount of crypto to fiat:
- Crypto Exchange: Trading your crypto on an exchange may be your preferred method if you want to trade it as an individual—businesses cannot use exchanges like this. Be sure to consult a professional advisor to ensure you know the legalities involved in transferring profits to an individual account.
- Crypto Swapping: Swapping crypto is a simplified service similar to an exchange. There’s usually no upfront fee, but a hidden fee can mean you end up with less overall value in the new currency than you started with. This option is also limited to individual use.
- Over-the-Counter (OTC) Desk: This is one of your better options, as you can benefit from the assistance of a third party that negotiates a private trade for a large amount. You may be able to negotiate a price that lets you retain the most value with this method. Your business can initiate this transaction directly.
- eCommerce Platform: In most cases, if you want to convert a large amount of crypto to fiat as a business, the best way to do so is through your eCommerce account, especially if it also acts as your payment processor. The platform may automatically convert crypto for you according to the rules you set in your account, or you may wait until exchanging a substantial amount.
Can You Profit from Converting Crypto?
This question actually has a lot of nuances baked in, so we’ll answer from multiple angles.
Am I Allowed to Accept Crypto and Convert It Into Other Crypto or Cash?
Yes, individuals and businesses can use crypto to buy and sell goods, and you are allowed to exchange cryptocurrency for other cryptocurrencies or for the US dollar (USD).
Can My Business Make a Profit Offering Cryptocurrency Conversions?
A company can only profit through offering crypto conversion services by obtaining the proper licenses and gaining state-level approval as a money transmitter. Bear in mind that terms differ from state to state, and consistent regulatory guidance at the national level doesn’t exist.
So, whether you’re an individual or a company interested in earning money converting crypto for others, you should only do so after talking to legal advisors and applying for all required licenses.
Is It Possible to Get Paid in Crypto and Convert It to Fiat (USD)?
Yes. You can sell products or services and accept crypto as payment, and you can turn around and instantly convert that crypto into fiat. Different options exist with low fees, which may permit you to preserve the cash value of the funds after conversion. Due to the volatility of crypto markets, however, you need to be aware of the risks involved in waiting to convert to fiat; crypto values go down as quickly as they go up.
Are You Allowed to Hold Crypto and Convert It at a Profit?
If you’re paid in crypto for goods or services, you can convert it to fiat immediately to lock the value in place. This may prevent you from running into operational challenges that stem from the volatility of crypto markets.
You are also allowed to hold on to some—or all—of your crypto and wait for the price to go up before converting it to fiat at a profit. This is a primary reason to accept crypto payments for many true believers in cryptocurrency. But again, it runs a risk. It’s possible the crypto price will decrease; if so, it might rebound someday and surpass the current rate or not.
What You Need to Know About Fees Associated with Converting Crypto
Fees for converting crypto to fiat vary by platform—and both fee schedules and conversion rates frequently change.
If you decide to use a payment processor, expect to pay anywhere from 1% to 2% of each transaction to convert your crypto to USD, plus a small flat fee per transaction.
If you use a centralized exchange to convert crypto, fees are typically on a tiered scale based on your monthly trading volume. Fees can be as low as 0.10% and as much as 5%. Hidden fees can be assessed by a spread in the exchange rate, in which you receive less than the total value in USD.
Learn all about fees businesses have to pay when converting crypto.
Do You Have to Pay Taxes on Crypto?
Unfortunately, yes. When someone pays you in crypto, the government treats that like income. Selling your crypto is treated like any stock or other investment and involves capital gains tax.
Paying capital gains taxes involves converting your crypto to cash or another cryptocurrency, so make sure you’re clear on the regulations surrounding crypto and taxes.
What Are the Pros and Cons of Converting Crypto at Scale?
Converting your crypto at scale is a business decision. You have to decide the timing and the methods that work best for you. The following are some of the pros and cons involved.
Pros
- There is plenty of trading volume for the most popular cryptocurrencies to convert your earnings into fiat (US dollar). This is also true regarding stablecoins, which are cryptocurrencies that are pegged 1:1 with the US dollar; the top stablecoins like USDC and Tether (USDT) have such high daily trading volume that you are unlikely to run into a problem converting your cryptocurrency into them.
- Locking in the value of a sale helps your business guarantee its profits. Since crypto markets are highly volatile, companies can run into trouble holding on to their favorite cryptocurrencies in the hopes their value will increase.
- Over-the-counter (OTC) markets and similar concierge exchange methods help you lock in a special price within a short window to get the best exchange rate for substantial amounts of crypto.
- Waiting to exchange a large amount of crypto at once may allow you to take advantage of particularly favorable exchange rates.
- You may be able to negotiate a lower trading fee when converting large amounts of a top-ranking cryptocurrency.
Cons
- Less popular cryptocurrencies may result in volume issues in which you end up with a less favorable exchange rate because of low availability.
- Converting all your crypto for its current cash value means potentially missing larger profits when the value of crypto goes up. How can you ever be sure you’re making the best deal possible?
- Selling cryptocurrency leads to capital gains taxes. This isn’t dependent on the amount converted, but it’s something to keep in mind.
Other Challenges to Be Aware Of
If you are looking to exchange hundreds of thousands of dollars worth of crypto or more using a special over-the-counter (OTC) trading service, that OTC trade may include an additional fee. Furthermore, the market may shift significantly while the trade is being carried out.
When dealing with a large amount of crypto, you need to be aware of withdrawal or trade limits. Depending on the platform and circumstances, some accounts are only approved for a limited trade volume. Additionally, there may be limits on the amount of crypto that can be withdrawn in a 24-hour period or over the course of a month. It’s important to know all of these details so you don’t inadvertently run into a critical bottleneck where your funds are stuck in an exchange instead of sitting in your bank account.
One other consideration is this: While on-chain crypto transactions happen instantaneously, moving fiat from an exchange or eCommerce platform into your bank account may take 1–5 business days. The total time and fees may vary depending on whether you use ACH or wire transfer.
Converting Crypto Isn’t the Only Option
One of the great things about cryptocurrency is that you can put it to use whenever you decide that’s the best business move. For instance, you can use Bitcoin, Litecoin, and Monero to pay for shipping with Bitcoin Postage.
Paying for shipping with your crypto means you don’t need to worry about losing value through exchange rates or fees—you’re paying the same price for shipping as anyone else using that platform. It’s just one more option to get the most out of your crypto.