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The allure of overnight riches can outshine the fact that Bitcoin was first used in an everyday transaction — to buy a pizza. Today, even the tastiest slice won’t come close to the 10,000 Bitcoins that order cost in 2010 — an amount now worth more than half a billion dollars.
Accepting cryptocurrency at a business has become easier and more widespread in the decade since. But it’s still more complicated than simply acquiring it as an individual. The checklist to get started includes finding a payments partner (probably), working through integration questions and thinking about your cash-conversion strategy.
Pros and cons of accepting Bitcoin at a business
No chargebacks or PCI compliance to worry about.
Could attract business from crypto enthusiasts.
If you choose to hold Bitcoin, the payments you accept could potentially become more valuable over time.
Keeping up with rapid changes in cryptocurrency technology and regulation could be burdensome.
If you choose to hold Bitcoin, you’ll be exposed to high price volatility. That could amount to significant losses for your business if you had to sell when the price was low.
You could face complex implementation challenges, like tax preparation and managing customer returns.
» Want to know more about cryptocurrency? Here are some basics
What a Bitcoin or other crypto transaction looks like
To make crypto transactions quick and simple, a merchant probably uses a crypto payments platform like BitPay or Coinbase. These companies make the user interface that facilitates the transaction, monitor the payment and provide services like locking the exchange rate for a set time to limit volatility.
A typical crypto transaction at a business might look like this:
A customer choosing to pay with crypto is presented with a QR code.
That QR code tells the customer’s digital crypto wallet or app where to send the crypto, a destination known as an address. This is similar to an email address, however it’s typically generated and used just once.
To verify the transaction is legitimate, the customer enters their password, called a private key.
The merchant can choose to receive the payment in crypto or in dollars.
What to know before accepting Bitcoin and crypto
Which cryptocurrencies will you accept?
There are thousands of cryptocurrencies, but most crypto payments tools only accept a subset of them. The most popular, Bitcoin, is generally supported everywhere. But if you’re interested in accepting Mooncoin or Alice, for example, you might need to search harder.
What tax and accounting issues will you face?
It’s a good idea to talk to your accountant or bookkeeper if you are thinking about accepting crypto.
First, you should be aware of the tax implications, especially if you plan on holding on to any crypto you receive.
Second, think through how information from your point-of-sale system gets to your accountant. For example, if you rely on a cloud-based system like QuickBooks or Xero, you’ll want to know if your crypto payments tool integrates with it.
Your customers are subject to capital gains taxes on any crypto they use to pay you. While you're not involved with this process, know that it could be a consideration when deciding how to pay.
» MORE: All about Bitcoin taxes
Will the payments be converted to cash? When and how?
This can have huge implications on your business, as big price swings mean the value of your crypto could rise — or fall — in a short amount of time. Will you hold on to whatever crypto you receive indefinitely? Will you convert to cash immediately? Will you convert it on a scheduled basis? Once you have a plan, make sure your preferred crypto payments service can actually implement it.
How will crypto affect your operations?
Crypto payments companies can help smooth out some implementation issues, like monitoring price volatility. However, a company will have operational questions to figure out.
When accepting crypto, there's no direct cost to you, says Don Apgar, director of the merchant services advisory service at Mercator Advisory Group, a payments industry firm. "But you have incurred a cost: to reformat a report; to train customer service; what happens if someone wants to return; what about disputes?” And time is a limited resource. “Everything you do means something else waits,” he adds.
Operational questions you might want to think through include:
What training will staff need?
Will you be prepared to answer customer questions?
Are there elements of customer service — like issuing refunds — that need to be rethought?
How will your crypto payments tool work with your current inventory or reporting practices?
At a glance: Accepting crypto vs. credit cards
Cryptocurrency is fundamentally different from credit cards. However, they share similarities that are important to businesses. Specifically, they both provide a way for customers to pay electronically, which is convenient for in-person transactions and a necessity for online sales.
A side-by-side comparison illustrates where key differences lie.
Payments not required to run through a payment tool.
Payments must run through a payment processor.
0% if done directly with customer. Can be 1% or so using a payment tool.
Standard flat rate is 2.9% plus 30 cents per transaction, but varies by processor.
Safety and security
Little to no responsibility for compliance or fraud.
Responsibility for compliance and (via fees) for fraud.
Resolving customer issues
No legal protections or chargebacks to manage, but you'll likely need to make clear your own policies.
Decisions often in the hands of card networks, and they often favor the customer.
Flexible and fast, but also can be volatile.
Slower, but likely more stable.
Not much now, for better or worse, but stay tuned.
Stable and uniform, and comes with lots of compliance effort.
Transactions are comparatively fast, but there are some learning curves.
Transactions are quick and how-to is well known, but underlying processes can be hairier.
Crypto payments companies
The companies below offer tools that allow customers to pay with cryptocurrency:
Price per transaction: 1% of each transaction for most businesses.
When a customer initiates a payment, Bitpay compares rates on multiple exchanges, uses the most competitive rate and does not charge a markup. The exchange rate presented to the customer is guaranteed for 15 minutes.
If a merchant chooses settlement in the cryptocurrency used for the transaction, the actual amount received is equal to the amount the customer paid as denominated in that cryptocurrency, even if the exchange rate changes later in the day. If settlement occurs in U.S. dollars (or other currency), the amount a merchant receives equals the original price stated in dollars — a $98 jacket will result in a $98 deposit, less the 1% fee, even if the exchange rate of the crypto used changes throughout the day.
Payment options: BitPay supports 13 cryptocurrencies and tokens.
Notable features: In addition to its own point-of-sale app, BitPay has a partnership with Verifone that puts the option to pay with crypto alongside the option to pay with card payments on a single device for in-person payments. This simplifies the checkout process and makes it more familiar for customers.
Price per transaction: 1%.
Volatility management: The exchange rate locks the moment a customer starts the checkout process, and the merchant can adjust the amount of time the price is locked.`
Payment options: Coinbase accepts seven cryptocurrencies.
Notable features: Coinbase has integrations with Shopify and WooCommerce. The company offers two account types. The pricing is the same, but there are differences in the level of hands-on control a user experiences:
You can set up an account in minutes.
Cryptocurrency payments go directly to your wallet for you to manage directly.
To convert to U.S. dollars, you’ll need to create a Coinbase Exchange account, transfer your crypto there and sell on the exchange.
Requires a compliance review that can take up to a month.
Transferring money to a bank account is made easier.
Coinbase manages your wallet and private keys.
Some or all of the cryptocurrency payment can automatically be converted to U.S. dollars or other currencies.
» MORE: Learn more about Coinbase
It’s worth noting that PayPal allows shoppers to pay using cryptocurrency. What makes PayPal different from other services is that merchants neither choose to allow this option, nor do they have the option to be paid in crypto. Instead, a PayPal user who holds cryptocurrency in their PayPal account can choose to pay with it. PayPal credits the merchant’s account with U.S. dollars.
While this option provides no functional direct exposure to crypto transactions to the merchant, you are giving some customers the option to pay in this way.