Ohio has become the first state to allow businesses to pay their taxes with bitcoin, and lawyers say other state governments will likely closely watch how the new payment method addresses certain operational challenges. 

On Monday, Ohio Treasurer Josh Mandel announced the launch of OhioCrypto.com, a website that allows businesses that operate in Ohio to pay their business taxes in bitcoin.

The Office of the Ohio Treasurer, however, won't collect any bitcoin. Instead, bitcoin payment processor BitPay will accept bitcoin payments through OhioCrypto.com. BitPay will then convert the bitcoin to U.S. currency and transfer that cash to the state treasurer's office. The bitcoin's exchange rate is set every 15 minutes by BitPay when a business starts their payment on OhioCyrpto.com. If there's any market fluctuation during that time frame, BitPay assumes the risk.

“The price volatility, obviously, is a concern that can cut either way,” said Cassandra Borchers, a partner in Thompson Hine's corporate transactions and securities practice group, of the concerns of using bitcoin.

But she added that concerns about price volatility and the longevity of bitcoin could be answered by spending the digital currency. “One of the big paths for bitcoin to survive is for people to spend it, not just buying it speculatively.”

To be sure, the Ohio treasurer still accepts credit and debit cards, and check and money order payments from businesses to pay taxes, acknowledging that not all businesses have a cryptocurrency wallet. Barry Miller, partner at Cleveland-based Mazanec, Raskin & Ryder, however, said bitcoin payments are a growing trend because entities want more ways to accept payments.

“Anyone that is in the business of collecting money for taxes or sales, the more ways they can allow people that owe them money to pay them before they default, the better. … You want it to be easier for people to pay you.”

He also added that the use of BitPay as the third party that accepts bitcoin payments allows Ohio to place the cybersecurity responsibilities for securing such payments onto BitPay. 

Looking forward, it's possible that other states could follow Ohio's lead in allowing this new type of payment if the state's initiative proves worthwhile. 

“Over time I think it's highly likely that many entities, including government at various levels, will come to accept fund transfers in the form of cryptocurrency,” said Daniel J. McMullen, partner at Calfee, Halter & Griswold's information technology practice. “We still are at the front end of it. The number of ways Ohio is seeking to demonstrate leadership in this arena, I have little doubt other state governments will be looking at this initiative.”