Cryptocurrencies are digital currencies that include the likes of Bitcoin, Ether and XRP. Several larger companies including Microsoft, Shopify, Home Depot, Starbucks and Subway have started accepting crypto payments. And many smaller companies have started accepting crypto too – with some exclusively accepting crypto payments.
Is it time you started accepting crypto? When accepting any new form of payment, it’s important to weigh up the benefits and drawbacks. Below are a few of the major pros and cons of accepting cryptocurrency payments that you should consider.
The pros of accepting crypto
Trade with customers around the world
Trading with customers around the world typically involves accepting a lot of different currencies. Many payment processors accept a limited amount of currencies. Paypal – one of the biggest payment processors in the world – supports 25 currencies. This is a lot of currencies, but many countries are still left out.
Cryptocurrencies can be bought by anyone in any country. By accepting a popular cryptocurrency like Bitcoin (which is supported by PayPal), you can truly sell your products or services on a global scale. This could allow you to access a lot more customers and greatly increase your company’s revenue.
Avoid currency exchange/payment processor fees
Exchanging foreign currencies also comes with fees. You can greatly reduce these fees by allowing customers to make purchases using cryptocurrencies. Exchanges do charge fees when converting a cryptocurrency back into regular currency, however you don’t have to transfer all of this crypto and could spend some of it on business services from around the globe.
Accepting crypto payments also prevents you having to use payment processors – most of which charge fees on transactions. Aside from Ether (which charges fees known as ‘gas fees’), most cryptocurrencies charge no extra costs for transactions, maximizing your profits.
Improve security and transparency
Crypto payments have many security benefits. Customers cannot commit chargeback fraud as they can when paying with regular money via credit card – blockchain technology means that once a payment is made, it cannot be reversed. The crypto you receive can meanwhile be stored in a cold wallet that is not connected to the internet and therefore impossible to hack.
Crypto blockchains also allow a level of transparency. Using tools like Arbitrum block explorer, you can monitor cryptocurrency payments and check wallet addresses to make sure money is coming from/going to the right place.
The cons of accepting crypto
Cryptocurrencies can be volatile
A danger of accepting cryptocurrencies is having to deal with their fluctuating value. As the likes of Bitcoin have shown over the years, cryptocurrencies can dramatically rise and fall in a short time. If a cryptocurrency suddenly plummets in value after receiving a payment, you could make a big loss.
Of course, crypto can also suddenly rise in value leading to large profits. However, if you’re accepting crypto payments long term, you’ve got to be prepared for highs and lows. This unpredictability may be too much for some business owners.
Crypto payments are still taxable
Cryptocurrency payments are not tax exempt. This means that you need to be willing to record all crypto transactions in order to make sure that you’re dec;aring the right amount of tax. Many accounting software platforms and accountants do not deal with crypto, therefore you may have to find other solutions. This can be too much of a hassle for some businesses.
If you plan to accept a lot of cryptocurrency payments and pay money out using crypto yourself, consider whether it’s worth hiring a cryptocurrency accountant or using a specialist accounting software application.
There’s a lot of technical stuff to learn
There is a lot of terminology to learn when dealing with cryptocurrency. When storing cryptocurrency, it’s worth learning the difference between a cold wallet and hot wallet – as well as understanding how private keys work. You may also want to look into how cryptocurrencies work. What is a blockchain? How are cryptocurrencies mined? And are you happy with the environmental impact?
A lot of people find this to be too much technical information to learn. Reading guides or even taking a course may be necessary. Make sure you fully understand how cryptocurrency works before you start taking payments.
Conclusion
Accepting cryptocurrency payments could be a good idea if you want to start trading globally with reduced fees and a greater level of digital payment security.
You may want to avoid accepting crypto payments if you would rather maintain a stable payment solution, avoid extra admin and not have to do lots of research.
