Recently, we’ve seen an increase in the number of businesses accepting cryptocurrency as payment for services. This is most common for digital agencies, where technological advancement is in their nature, and they’re naturally looking to stay ahead of the game.
Going forward, we expect this to continue to develop. That’s why we’ve outlined a few things to think about when it comes to your Professional Indemnity policy.
What is cryptocurrency?
There are several definitions of cryptocurrency. To summarise, it’s a digital payment method based on a peer-to-peer system, where transactions are kept on a public ledger, and it’s stored in digital wallets. Bitcoin, Litecoin or Ethereum are all types of cryptocurrency.
It works in the same way as a traditional payment. Say a client comes to you for a web development project and you agree to your usual contract or terms and conditions. Then, instead of being paid in a currency like GBP, you’ll be paid in a cryptocurrency of mutual agreement.
How does it affect your Professional Indemnity cover?
We’ve spoken about Professional Indemnity in the past, and you can read about it here. In short, it protects your business against allegations that the service you provided was deficient, such as if a client feels that your work doesn’t meet their expectations, and therefore withholds payment.
Below, we’ve explained how your Professional Indemnity could be affected if you accept payment via a cryptocurrency, rather than traditional means. But remember, this can vary depending on your circumstances.
Payment by cryptocurrency shouldn’t affect your insurer’s position, and we expect the claim to be handled as normal. The noticeable difference will be that if a settlement is payable to your client, the insurer then chooses the currency of settlement. This will likely be via the currency of the territory involved, rather than cryptocurrency.
Your premium for Professional Indemnity is rated off your expiring turnover. This means that your payment of services via cryptocurrency would need to be converted to GBP and declared accordingly. It’s extremely important that you factor this in.
With cryptocurrency being quite volatile in value against GBP, we’d suggest converting at the time the contract was signed, to ensure accuracy. That being said, your accountant should be able to advise on how to record this correctly, so be sure to consult them first.
Where RiskBox comes in
Most agencies only realise their Professional Indemnity cover isn’t appropriate when they’re faced with legal action. Don’t let this be the case with your company. Instead, speak to RiskBox. We’re experts in identifying the right protection for your business and recommending a reputable insurer.
If you’re interested in reviewing your current policy, or need help choosing Professional Indemnity insurance, call us today on 0161 533 0411 or email firstname.lastname@example.org. You can also fill in our online contact form and we’ll get straight back to you.
Photo by Bermix Studio on Unsplash
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