Should Your Business Start Accepting Cryptocurrency?

While crypto can be easily adopted by e-commerce businesses, it’s less suited for traditional retail settings.

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Big-name companies are jumping on the Bitcoin bandwagon, allowing customers to pay with the cryptocurrency.

Overstock, Dish Network and AT&T offer customers the option to pay with Bitcoin. PayPal added a "check out with crypto" option in March that lets users to pay with Bitcoin, Litecoin, Ethereum and Bitcoin Cash at merchants that use PayPal Checkout.

Should your small business follow suit? The answer depends largely on your customer base, business model and desire to learn about crypto. Here’s how to determine if cryptocurrency is right for your business.

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Assess your learning curve

Roadway Moving, headquartered in New York, started accepting payment with bitcoins in 2017. Initially, the goal was to increase awareness of cryptocurrency. Ross Sapir, Roadway’s founder and president, is a crypto evangelist and began personally investing in it in 2017.

"Personally, I’m a crypto guy," Sapir says. "Crypto works in alignment with my core values."

Sapir was already well-versed in cryptocurrency before offering it as a payment option. But many small-business owners will need to learn about crypto from scratch in order to start accepting payments.

Reading a cryptocurrency guide is a good starting point. You’ll also want to consult with your accountant and make sure you’re clear on the tax implications and reporting requirements of accepting digital currencies.

"Cryptocurrencies are treated as property for tax purposes. Therefore, each use of crypto creates a tax realization event, potentially creating an administrative burden for the sender and the recipient," Sung Choi, vice president of business development at Coinme, a digital currency exchange, said via email. "To avoid complexity, it may be better to limit using crypto for payments to more significant value transactions, such as buying a car."

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Consider your business model

Cryptocurrency is, by definition, a digital currency. While it can be easily adopted by e-commerce businesses, it’s less suited for traditional retail settings, Choi says.

"It’s challenging to scale accepting crypto payments in a brick-and-mortar setting with multiple employees and many point-of-sale (POS) devices," Choi said.

For Roadway Moving, accepting cryptocurrency made business sense because the company occasionally handles international moves and jobs that come in at five or six figures.

"It’s easy. It’s fast. It’s secure. And the fees are tiny," Sapir says. With international moves, Bitcoin payments clear in minutes rather than days, he says. "I don’t have to worry about funds being held or transactions being denied."

Weigh the pros and cons

Cryptocurrency has some advantages over traditional payment methods, including:

Lower fees: Processing fees for crypto payments are typically 1% or less. On credit card transactions, businesses pay an interchange fee of 1% to 3% per transaction, plus processing fees and other charges set by the merchant services provider.

No chargebacks: Payment disputes are a major pain point for small businesses, which are on the hook for the refund and potential chargeback fees if a payment is reversed by a customer’s bank. Chargeback fees may range from $20 to $50 — and potentially be even higher — depending on the payment processor.

There are no chargebacks in crypto. Transactions cannot be reversed by the customer and refunds can be issued only by the retailer.

Disadvantages to accepting cryptocurrency payments include:

Volatility: The value of cryptocurrency can fluctuate, sometimes wildly, so it's essential that businesses that accept crypto convert it to cash daily. Payment providers like Flexa and BitPay can do this instantly and automatically, negating volatility issues.

Practicality: Businesses typically can’t use crypto to cover operating expenses, either, so payments would have to be converted to cash to pay utilities and make payroll.

While security is often noted as a plus for crypto — Bitcoin has been called unhackable — there are other security concerns. If you lose the private key to your crypto wallet, for example, you lose access to any cryptocurrency held in that wallet (typically an app, website or physical device). Unlike funds in bank accounts, which are backed by the Federal Deposit Insurance Corp., cryptocurrency isn't insured.

How to start accepting payments with cryptocurrency

Technically, the first step to accepting crypto is to establish a cryptocurrency wallet and sign up for an exchange like Coinbase or Gemini so you can convert any payments received into cash. Then, you can add a payment button to your website, use a QR code or share your public wallet address to accept payments.

Customers may not jump on crypto payments right away; only two Roadway Moving customers have paid with bitcoins since the company started accepting it, Sapir says.

But crypto adoption is skyrocketing: This year, global users grew from about 100 million to more than 220 million from January to June, according to the cryptocurrency platform Crypto.com — and payment volume will likely follow.

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