In early 2021, PayPal added a “Checkout with Crypto” option for their users. Other big names in business – from Starbucks to Tesla – are also accepting crypto as a payment option for their customers. Crypto has been around for more than a decade, yet mass-scale adoption has been met with uncertainty and skepticism.

This article introduces you to basic cryptocurrency concepts, how your business can begin to accept crypto payments, and the pros and cons of accepting Bitcoin or other cryptocurrencies as payment.

What is Cryptocurrency?

Unlike a fiat currency managed by a centralized government, cryptocurrency is a digital and tradable currency managed within a decentralized computer network. All transactions and records of ownership are stored in a digital ledger, known as the blockchain. Once encrypted, the record is unchangeable and only readable by its intended recipient.

Cryptocurrencies operate by permitting the transfer of “coins” between individuals using a decentralized peer-to-peer network without 3rd party intermediaries. As security and confidence increase, the advantages – and demand – for crypto acceptance does too. While many crypto holders parlay market volatility into growing their wealth, others simply want to use crypto to facilitate the sale of goods and services.

How Does a Business Accept Cryptocurrency?

If your business currently accepts credit card payments, you’re already familiar with payment processors. Big names in business credit services – like Visa and Mastercard – are increasingly being joined by other businesses who appreciate the agility and affordability cryptocurrencies offer.

Since 2011, close to 50K businesses have integrated crypto into their payment solutions. Digital payment processors like bitpay, Coingate, and Coinbase Commerce (the largest global centralized crypto exchange), offer digital currency gateways for merchants – large and small. They also offer easy integration with popular e-commerce platforms like Shopify and WooCommerce.

Like credit card processing gateways, cryptocurrency processors provide streamlined processes for multiple transactions, with varying value-added services.

When a customer pays for goods or services, a unique QR code is generated for the transaction which the customer scans using a mobile device. After authentication, their payment is verified in the public ledger e.g., the blockchain, and the transaction is completed.

Here’s how these crypto payment processors add value for merchants and businesses:

• Easy e-commerce integration with popular e-commerce and POS platforms
• Stability shielding from fluctuating crypto values
• Flexible payment options, including cash
• Less expensive transaction fees than credit cards – with some caveats
• Invoicing, mass payouts, recurring payments, and other accounting functions

What are the Pros and Cons of Accepting Cryptocurrency?

For small businesses, providing customers with another way to pay for goods and services is always a positive. With an estimated 300+ million crypto users globally, the more cryptocurrencies your business accepts equates to higher conversion rates – especially true if your goal is to reach a global audience. In the not-so-distant future, cryptocurrency payments may be as ubiquitous as credit cards.

Cryptocurrencies have their well-publicized downsides too. Notoriously volatile, crypto still lacks widespread appeal, and complicated tax reporting requirements make them unwieldy for many small businesses (not using a payment processor).

Here are some other pros and cons you’ll want to consider before deciding whether accepting cryptocurrency payments is a good fit for your small business.

Pros of Accepting Cryptocurrency

• Better payment security. Crypto provides a more secure form of payment because the data, e.g., an individual’s “crypto card” information, is stored in an individual’s crypto wallet on the blockchain, not a centralized hub vulnerable to hacking and security breaches, greatly reducing the possibility of fraud.
• Lower transaction fees. Cryptocurrency payment processors charge fees as low as 1% (or less) compared to companies like PayPal which take close to 4% out of each transaction on their platform.
• Avoid international currency fees. Because crypto is not a fiat currency, payments are not assessed conversion fees or waylaid by foreign bank clearances.
• Irreversible transactions. Once a crypto payment is completed, it becomes permanent. This can be a good or a bad thing, as it helps merchants track their cash flow, but can become complicated should a customer request a refund.

Cons of Accepting Cryptocurrency

• It’s risky. In the past year, bitcoin’s value fluctuated by 8% over three months. While crypto fans appreciate the currency’s immunity from inflation and government manipulation, that type of unpredictability can make cryptocurrency untenable for small businesses owners.
• Tax considerations. For tax purposes, the IRS considers cryptocurrency as property, taxed at its value upon receipt. Meaning, if your cryptocurrency loses value after the fact, you are still liable for taxation on its full value at the time of acceptance.
• Lack of widespread acceptance. Crypto exchanges are still in their infancy and have not gained widespread acceptance – yet.

Get Help With Your Business

Do you need help forming or funding your business? Skip can help with your formation, SBA loans, grants, or other business financing options. Get ongoing personalized help from our team. Join Skip Premium today and get 1-1 support for your business.

How Else Can Skip Help? Whether you need assistance navigating funding for your small business — like SBA loans, grants, or other financing options, or guidance with government-related services — like TSA PreCheck or DMV appointments, we’re ready to help. Become a member and skip the red tape.