Should You Consider Accepting Crypto Payments?
Have you noticed more of your customers asking if they can pay you in Bitcoin or another cryptocurrency?
As digital currencies go mainstream, business owners are increasingly faced with the decision of whether to accept crypto payments. There are compelling arguments on both sides.
Offering crypto payment options taps into a growing trend and can attract enthusiastic new customers. However, the volatility and lack of regulation raise critical downsides to weigh as well.
In this comprehensive guide, you’ll discover the key benefits and drawbacks for merchants considering accepting cryptocurrency. You’ll learn exactly what crypto payments involve, how to enable them, and whether taking the plunge makes sense for your small business.
What Are Cryptocurrencies and Why Do Businesses Accept Them?
As cryptocurrencies see increasing adoption, a comprehensive review of CoinSpot and similar platforms can help businesses evaluate solutions for accepting decentralized payments. Well-designed crypto platforms offer critical functionality around compliance, security, transparent fees, and customer support to facilitate blockchain integration.
Without vetted platforms that simplify crypto for average users, actual utilization remains low despite growing interest. Both consumers and merchants rely on the same backbone services for accessing, storing, and transferring digital assets. So whether enabling commerce or accessing crypto investment opportunities, these platforms dictate accessibility.
Comprehensive reviews of exchanges look at its overall usability and toolset for crypto newcomers along with advanced trading features for seasoned investors. Assessing available coins and tokens, payment fees, customer service responsiveness, security protocols, and reporting insights ensures the platform can handle critical business needs. Comparing cost structures, API offerings, liquidity sources, and DeFi capabilities is also important relative to alternative options.
As the gateway into new crypto and blockchain utilities for both customers and companies, platforms require rigorous evaluation before integration. A comprehensive review framework focused on core functionality, usability, costs, and emerging features aids adoption platforms that can then smooth adoption barriers through comprehensive design tailored for business and consumer needs.
The Benefits of Accepting Cryptocurrency for Small Businesses
Save Big on Transaction Fees
One major alluring factor of crypto payments for business owners is slashing processing costs. Between interchange fees, authorization charges, cross-border penalties and more, accepting credit cards costs serious money. Crypto transfers the payment directly from customer to company, removing all those middlemen taking a slice of each sale.
So, break down the exact savings. The average processing rate for online credit and debit card transactions hovers between 2-4%. That means for every $100 sale, you’re coughing up $2 to $4.
With crypto payments, average fees add up to around 1% or less per transaction. So on a $100 sale, you would only pay $1 at most. The more sales your business handles, the more dramatic your cost reductions become over time.
Tap Into the Crypto-Curious Community
Have you noticed crypto entering mainstream chatter more often? Cryptocurrencies have exploded into a $1.3 trillion market seemingly overnight. Surveys show up to 21% of Americans have invested in crypto already. An entire ecosystem of rabid crypto enthusiasts exists, always eager to spend their hard-earned coins.
By accepting cryptocurrency, you demonstrate your business is forward-thinking and technologically hip. You open your doors to new clientele itching to use their altcoins in the real world. Early adoption in such a rapidly emerging space pays dividends when it comes to public perception and branding down the line.
Speed Up Access to Revenue
Have you ever had to wait days or weeks to receive funds from online sales as payments crawl through cumbersome traditional finance rails? The burden of lagging cash flow hurts, especially for smaller companies operating on tighter budgets.
Cryptocurrency changes that. Crypto payment finality often completes within minutes, if not seconds. Instead of watching and hoping the money clears from a credit card purchase, crypto deposits directly into your possession right away. The instant ability to reinvest funds compounds over time.
Additionally, accepting cross-border crypto payments avoids international wire transfer hangups. Global payment settlement can drag out for weeks as various intermediary banks take their slice of foreign transaction fees along the way. Cryptocurrency allows money to zip around the world seamlessly no matter where your customers reside.
The Potential Downsides of Accepting Crypto
Of course, enabling new payment methods does introduce several risks tied specifically to cryptocurrencies. As an informed business owner, you need to weigh the pros and cons completely before moving forward.
Extreme Volatility Causes Pricing Headaches
If you’ve followed Bitcoin at all, you probably know its pricing graph looks more like a teenager’s mood swings rather than a stable asset. All cryptocurrency values seesaw dramatically day to day due to massive speculation, media hype cycles and complex economic factors.
For example, the price of Bitcoin in 2021 whipsawed from $30,000 per coin down to $17,000 then back up to $60,000 all within six months! That type of extreme volatility makes it impossible to set reliable long-term pricing for products and services. The money customers pay could lose significant purchasing power by the time you withdraw and convert it into dollars.
Sudden coin crashes also incentivize buyers to unload crypto quickly before it devalues further. This forces merchants to liquidate into cash faster. You must diligently watch charts and time exchanges strategically to avoid big losses. If wild daily price swings give you migraines, crypto accounting headaches might overwhelm you.
You’re on Your Own for Support
Top payment processors like Stripe and PayPal invest heavily in customer support infrastructure. When errors or issues inevitably occur, merchants rely on these teams to quickly provide solutions. You enjoy an added safety net.
However, with decentralized crypto payments, no centralized entity exists to call up for assistance. Transaction disputes must be handled directly with customers without a third party available to arbitrate or refund.
If you or an employee makes a mistake that sends funds to the wrong recipient, no crypto bank manager exists to help recover those coins. Without proper precautions, human errors could prove extremely costly. Make sure your team has the technical skills to manage crypto accounting, storage and security competently before accepting any payments.
How Businesses Accept Crypto: A Quick Guide
Enabling cryptocurrency transactions doesn’t require advanced technical skills, but rather following a few simple steps:
Choose a crypto payment processor – Securely store, accept and manage crypto using a provider like BitPay or Coinbase Commerce. These gateways integrate with sites/apps for easy checkout.
Display payment instructions – Add wallet addresses, QR codes or payment buttons that customers scan/click to initiate transactions.
Monitor crypto value changes – View historical charts of coin prices to determine optimal times to convert into cash.
Adjust tax accounting strategy – Consult a qualified accountant experienced in crypto to ensure accurate IRS reporting.
The process for accepting cryptocurrencies mimics setting up any e-commerce payment method. The main difference lies in managing backend volatility and accounting. With the right crypto-savvy team supporting you, the barriers to entry remain quite low.
Critical Security Safeguards for Crypto
Since cryptocurrencies undergo completely digital transactions, hackers salivate over opportunities to covertly siphon funds if business owners don’t take proper precautions. Prevent cyber criminals from robbing your business blind in the blink of an eye.
To lock down airtight protection, first and foremost you must securely back up any wallet private keys offline. Never store these credentials digitally where malware could access and transmit them to unauthorized users. The availability of backups also provides the ability to quickly restore access in case of ransomware attacks that freeze access.
Transactions should funnel through a dedicated crypto payment processor rather than directly peer-to-peer. These services incorporate robust fraud monitoring to detect suspicious activity, plus insure against loss in worst-case breach scenarios.
Finally, compartmentalize wallet access across multiple trusted team members. Distribute responsibilities so no single employee controls the full transaction workflow. The checks and balances make it exponentially harder for an insider to steal funds unnoticed.
Accounting Tips for Smooth Crypto Tax Reporting
Government regulations for crypto mean The IRS treats them akin to investment assets rather than standard currencies. That means each payment your business receives in crypto potentially triggers a taxable event. But correctly tracking basis value amid volatile conversion rates defies simplicity. Don’t let poor accounting bite you during tax season.
First, record the fair market value of crypto income immediately at the time you receive it. Whether you choose to convert the coins into cash right away or hold them as an investment determines the next steps. Work closely with an accountant experienced in crypto tax law to categorize gains/losses properly on tax returns.
If converting to cash quickly, the accounting closely mirrors a normal transaction. However if holding crypto assets long term, you must carefully track basis, report capital gains upon sale and account for swings in valuation each tax year. Consider automating tax classifications with an accounting platform designed specifically for cryptocurrency payments. Removing manual misclassifications provides peace of mind.
The heightened complexity of crypto accounting warrants implementing robust processes from day one. However, the payoff of added revenue and reduced fees ultimately justifies the extra effort.
The Final Takeaways
Ultimately you must weigh your appetite for risk versus potential reward. Cryptocurrency payments offer undeniable advantages but also carry worrisome implications.
If you feel confident you or your staff can handle crypto accounting demands and price volatility, crypto payments deserve consideration. The cost savings alone may justify taking the plunge.
However, if the existing hassles of managing business finances already keep you up at night, adding a brand new variable into the mix poses a real test of comfort level. Only you can decide what makes sense for your company’s growth.