Crypto

Accepting Bitcoin in Your Business: Pros, Cons and Where to Start | RageMage

The allure of instant wealth may overshadow the fact that bitcoin was first used in everyday transactions – to buy pizza. Today, not even the tastiest morsel compares to the 10,000 bitcoins that were worth an order in 2010 — an amount now worth over half a billion dollars.

The adoption of cryptocurrencies in business has become easier and more common in the following decade. But it is still more difficult than just acquiring it as an individual. The checklist to get started includes finding a payment partner (probably), dealing with onboarding issues, and thinking about your cash out strategy.

Advantages and disadvantages of adopting bitcoins in business

Advantages

  • No need to worry about chargebacks or PCI compliance.

  • Can attract business from crypto enthusiasts.

  • If you choose to hold bitcoins, the payments you accept may become more valuable over time.

inconvenience

  • Keeping abreast of rapid changes in cryptocurrency technology and regulation can be exhausting.

  • If you choose to hold bitcoins, you will face high price volatility. This can result in significant losses for your business if you sell at a low price.

  • You may face complex implementation challenges such as preparing tax returns and managing customer returns.

» Want to learn more about cryptocurrencies? Here are some basics

What does a bitcoin or other cryptocurrency transaction look like

To make crypto transactions easy and fast, a trader is likely to use a crypto payment platform such as BitPay or Coinbase. These companies create a user interface that facilitates a transaction, tracks a payment, and provides services such as locking the exchange rate for a specified period of time to limit volatility.

A typical crypto transaction in business might look like this:

  • A buyer who decides to pay with cryptocurrency is provided with a QR code.

  • This QR code tells the digital crypto wallet or client app where to send the crypto, a destination known as an address. This is similar to an email address, but is usually created and used only once.

  • To verify that the transaction is legitimate, the client enters their password, called the private key.

  • The seller can choose to receive payment in cryptocurrency or dollars.

  • What You Need to Know Before Accepting Bitcoin and Cryptocurrency

    What cryptocurrencies do you accept?

    There are thousands of cryptocurrencies, but most cryptocurrency tools only accept a subset of them. The most popular, bitcoin, is usually supported everywhere. But if you want to accept Mooncoin or Alice, for example, you might have to look harder.

    What tax and accounting challenges will you face?

    If you are considering accepting cryptocurrencies, it is a good idea to talk to your accountant or accountant.

    • First, you need to be aware of the tax implications, especially if you plan on holding any cryptocurrency you receive.

    • Second, think about how information from your POS system gets to your accountant. For example, if you rely on a cloud-based system like QuickBooks or Xero, you need to know if your crypto payment tool integrates with it.

    Your clients are subject to capital gains tax on any cryptocurrency they use to pay. Although you are not part of this process, please be aware that this may be taken into account when choosing a payment method.

    ” MORE: All inclusive bitcoin taxes

    Will payments be converted into cash? When and how?

    This can have huge implications for your business as large price fluctuations mean that the value of your cryptocurrency can rise or fall in a short amount of time. Will you store the received cryptography indefinitely? Do you immediately convert to cash? Will you convert it on schedule? If you have a plan, make sure your favorite crypto payment service can actually implement it.

    How will cryptocurrency affect your activities?

    Crypto payment companies can help with some implementation issues such as monitoring price volatility. However, businesses will have to deal with operational challenges.

    There are no direct costs when you accept cryptocurrency, says Don Apgar, director of advisory services at payments firm Mercator Advisory Group. “But you incurred costs: reformatting the report; customer service training; what if someone wants to come back; what about disputes? And time is a limited resource: “Everything you do means that something else is waiting for you,” he adds.

    Operational issues you may want to consider include:

    • What training will staff need?

    • Are you ready to answer customer questions?

    • Are there elements of customer service, such as refunds, that need to be reworked?

    • How will your cryptographic payment instrument work with your current inventory or reporting methods?

    Quick Review: Accepting Cryptocurrency and Credit Cards

    Cryptocurrency is fundamentally different from credit cards. However, they share important business similarities. In particular, they both offer customers an electronic payment method that is convenient for in-person transactions and indispensable for online sales.

    A visual comparison shows what the main differences are.

    Payments must not go through a payment instrument.

    Payments must go through the payment system.

    0% if done directly with the client. It can be about 1% when using a payment instrument.

    The standard flat rate is 2.9% plus 30 cents per transaction, but varies by processor.

    Little or no liability for compliance or fraud.

    Liability for compliance and (through fees) for fraud.

    Solve customer problems

    No legal protections or chargebacks, but you may need to clarify your own rules.

    Decisions are often in the hands of card chains and they often favor the customer.

    Flexible and fast, but can also be unstable.

    Slower, but probably more stable.

    Not much right now, for better or worse, but stay tuned.

    Stable and consistent, and comes with a lot of effort to ensure compliance.

    Transactions are relatively fast, but there are learning curves.

    Transactions are fast and procedures are well known, but the underlying processes can be more complex.

    Cryptocurrency payment companies

    The companies below offer tools that allow customers to pay with cryptocurrencies:

    BitPay

    Transaction price: 1% on every transaction for most companies.

    Volatility management:

    • When a customer initiates a payment, Bitpay compares rates across multiple exchanges, uses the most competitive rate, and does not charge any markup. The exchange rate presented to the client is guaranteed within 15 minutes.

    • If the seller chooses to settle in the cryptocurrency used for the transaction, the actual amount received is equal to the amount paid by the buyer denominated in that cryptocurrency, even if the exchange rate changes later in the day. If settlements are made in USD (or other currency), the amount the trader receives is equal to the original price quoted in dollars – a $98 jacket will result in a deposit of $98 minus 1%, even if the crypto exchange rate used changes in during the day.

    Payment options: BitPay supports 13 cryptocurrencies and tokens.

    Notable features: In addition to its own point-of-sale app, BitPay has partnered with Verifone to offer cryptocurrency payment along with card payment on the same device for in-person payments. This simplifies the checkout process and makes it more familiar to customers.

    Coinbase

    Transaction price: one%.

    Volatility management: The exchange rate is fixed at the moment the buyer starts the checkout process and the seller can set the duration of the price lock.

    Payment options: Coinbase accepts seven cryptocurrencies.

    Notable features: Coinbase has integrations with Shopify and WooCommerce. The company offers two types of accounts. The price is the same, but there are differences in the level of hands-on control the user experiences:

    • You can create an account in minutes.

    • Cryptocurrency payments go straight to your wallet so you can manage them directly.

    • To convert to USD, you will need to create a Coinbase Exchange account, transfer your cryptocurrency to it, and sell on the exchange.

    • A compliance check is required, which can take up to a month.

    • Transferring money to a bank account is made easy.

    • Coinbase manages your wallet and private keys.

    • Part or all of a cryptocurrency payment can be automatically converted to USD or another currency.

    ” AFTER: Learn more about Coinbase

    PayPal

    It should be noted that PayPal allows buyers to pay with cryptocurrencies. What makes PayPal different from other services is that merchants do not allow this option and they do not have the option to pay in cryptocurrencies. Instead, a PayPal user who holds cryptocurrency in their PayPal account can choose to pay with it. PayPal credits the seller’s USD account.

    Although this option does not provide any functional direct access to cryptocurrency transactions for the merchant, you provide some customers with the option to pay in this way.

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