Things to Remember Before Accepting Bitcoin Payments
Although digital currencies like Bitcoin are not mainstream at the moment, we see a clear increase in the number of companies that accept payments in Bitcoin. When you run a small business, it is easy to think that you should do the same. But the truth is the answer to whether or not you should accept Bitcoin payments is not as simple as you might think, as highlighted by crypto experts from Cryptoext.
The biggest advantage of Bitcoin is the fact that inflation cannot affect it. There is a limited supply available so there is no government capable of influencing the currency’s value. The problem is that it is very volatile. It can be very risky to rely on it due to this reason.
Bitcoin is by far the most common of all cryptocurrencies businesses can accept. Its use can be beneficial since the business can avoid long processing times and transaction fees. There is also no need to convert to different currencies.
What Do You Need To Accept Bitcoin Payments?
The most important thing you need is the Bitcoin wallet. This lets you store, sell, and buy cryptocurrency. The Bitcoin wallet uses private keys, which are secret numbers letting you access the cryptocurrency. You could also use the hardware wallet, which means you have to write down keys or store them on the hard drive. It is also possible to sign up with an exchange like Coinbase to store the keys on a server controlled by a third party.
When you want to accept Bitcoin payments and you use platforms like Shopify or Etsy, there are partnerships in place with processors like Bitpay and Coinbase Commerce. This allows the store to accept a crypto payment and the processors are available for free.
What To Consider Before Accepting Bitcoin Payments
The truth is that for a large business, accepting cryptocurrency payments is not really a problem. It can be a good financial decision. However, for small businesses, there are different things that have to be considered.
It is important to understand that you still need to deal with several payments that use conventional currencies, like salaries, rent, and supplier fees. Most customers did not hear about Bitcoin so you absolutely need to take this into account before making a clear transition to the cryptocurrency.
Then, we have to understand that you cannot reverse Bitcoin transactions. Your customers might request refunds so you need to be very careful and have a strong policy in place to deal with them.
Also, tax implications can be quite serious. Bitcoin might be treated as being property by the authorities in your place of residence. This implies having to pay some taxes. You have to practically report all that you receive and might end up needing to pay different taxes in terms of value than when you got payments.
Digital transactions to have processing fees. These can vary from 2% for regular credit card payments to up to 3% when using PayPal. With cryptocurrency, fans say that a huge advantage is that there is no fee that needs to be paid when crypto coins are used. This is due to the lack of intermediaries and the p2p currency system. In reality though, fees do exist.
Just like everything in the cryptocurrency industry, we see quick changes in transaction costs. Every single cryptocurrency transaction will occupy data. There is data processing power needed to make the transaction happen and the power has to be paid. In the past, costs were not that high but as the Bitcoin network grows, processing fees can become a very big part of the full price paid by the customer and how much the seller receives.
There have been situations in which Bitcoin transactions had a processing fee of around 15%, which is quite huge. Fortunately though, the large cryptocurrency exchanges are investing into making these processing fees smaller. Basically, all this means that if you want to accept Bitcoin payments, you need to keep your eyes on these fees.
We can easily highlight this as the biggest problem with accepting Bitcoin payments. Cryptocurrencies are volatile and this introduces a huge unpredictability for the business when it comes to cash flow.
Bitcoin did experience wild swings in the past 12 months. They were even wilder before. The same goes for other big cryptocurrencies on the market, like Ethereum.
A big reason why volatility is so high though is that regulators try to implement rules and this can drastically influence cryptocurrency value. As a store owner, getting a specific payment and then seeing Bitcoin go down can lead to the unwanted situation in which you end up with a much lower amount in your bank accounts when you exchange crypto coins to your fiat currency.
On the whole, accepting Bitcoin payments can be very beneficial for your business but you need to take into account the disadvantages associated with them. It is always best to work with a financial expert that can help you set up everything properly.
At the end of the day, the decision is all about how much risk you are willing to experience. Accepting Bitcoin payments right now is risky, no matter what others might tell you. However, for some businesses, these risks are pretty low. For instance, when you are selling digital products like eBooks, Bitcoin volatility will not affect you much. This is because once the eBook was created, you do not need to spend more money to create a product for your potential customers. You already have the product.
In the event that you need to get something from suppliers to create your products, Bitcoin payments are quite risky. For instance, if you sell customized iPhone cases, you have to buy the iPhone cases and then customize them. When Bitcoin price goes too low, it might actually mean you pay the customized cases for less than what you pay to get them before you do the work. This would be disastrous for the business if it would go on for a long time.