Accepting Bitcoin as a payment method – Why you should and how to go about it

Cryptocurrency has barely been out of the news since its meteoric rise to prominence in the latter half of 2017. Given its gradual segue into mainstream parlance and usage, accepting Bitcoin (or another cryptocurrency) as payment in your business seems like the next logical step.

However, despite cryptocurrency’s growing popularity, Bitcoin, in particular, there are still some issues surrounding market volatility, legality and utility. What businesses need to consider before attempting to accept crypto payments is whether it is worth it for them, right now, in a financial ecosystem that still hasn’t entirely made up its mind about the future of cryptocurrency

Some pros and cons need to be considered before taking on the retail acceptance of crypto, and you need to weigh them accordingly.

Cutting out the clutter

One of the advantages to accepting Bitcoin transactions is that all payments are client instigated, that is they “send” the money to you, rather than you taking the cash or changing a credit or debit card. This negates any potential change backs inherent in credit card transactions.

In general, the acceptance of Bitcoin can conceivably eradicate a lot of extraneous details:

“The middle-man” – This could be a credit card issuer or banks, which becomes obsolete when dealing with crypto’s peer-to-peer network.

User Data – when dealing with card transactions there is a need to retain user information. You don’t need to do that with Bitcoin transactions (okay, if they want a physical product you still need their details, or they’ll never receive it).

Hacker bait – In reducing the customer data you hold, you also become less of a target to hackers who want access to your client information. In turn, this improves your security, by taking away the bait for hackers to follow.

Cutting out the middle-men and things like currency exchanges can improve prices and efficiency for your clients, or bolster business returns.

How do I go about accepting Bitcoin?

The method of the Bitcoin payment option requires serious consideration. There are several different ways that your business can accept Bitcoin payments, and the differing methods continue to develop.

An initial consideration point is what kind of business you have; Physical store(s) only, physical stores with an online presence, online only? The difference in these business models will affect the method by which you’re able to accept payments. A second consideration is how much cryptocurrency flow is you likely to get.

For physical stores and offline payment options, having a QR code by your cash register for a wallet ID is a simple idea for the small offline payments. If your business is online, you can always give your clients access to your public wallet address.

Alternatively, if you have many customers who will want to pay in Bitcoin (if you have a significant online presence or accept payment for high-value items), investing in a platform to facilitate Bitcoin transactions may be worth it. Through entities such as Coinbase and Bitpay, there are options for accepting cryptocurrency payments and processing the payments into a wallet or exchanging to fiat currency.

For online payment, you may wish to integrate a button onto your website for Bitcoin payments, along with instructions on how to make the transaction, whichever method you choose to utilize.

Finally, there are even physical hardware terminals that work in much the same way as credit card payments.

The way a business decides to accept Bitcoin payment depends on many factors, how many clients want it, how much clients are likely to spend with Bitcoin, physical, offline or online payments. A breakdown of the business demographic orientation would help significantly in this decision.

N.B. Businesses that issue invoices for payment would need to consider the current volatility of Bitcoin. At present, the continuing usage of fiat currency allows for an alternate currency equivalent with cryptocurrency and supplying an approximate price in Bitcoin.

Storage or conversion?

Depending on your financial set-up you will need to consider whether to maintain your payments in Bitcoin, in which case you will need to find a secure storage option, or if you wish to convert all of your cryptocurrency payments into fiat currency, you will need to find a platform to enable this. The third option may be that you keep a proportion in Bitcoin and cash-out part of it, in this case, you will need to find solutions to both storage and exchange.

Selecting the correct storage solution is vital for the security of your Bitcoin and also to allow your clients to feel secure in the knowledge that you won’t lose their payment. Online ‘hot’ wallets are the least secure option as they are connected to the internet. They still have private keys and some support 2-factor authentication, but of the options, they are still considered the least secure. Offline ‘cold’ wallets (connected to the net purely for crypto transfers) and hardware wallets are considered far more secure because there is no net connection to enable hacker pick-pockets.

The least secure option is to keep your Bitcoin on an exchange. Exchanges, while upgrading their security all the time, are the most targeted and most susceptible to hackers.

N.B.It is far more lucrative for a hacker to target a whole exchange (and thousands of accounts) than a single wallet.

Conversion of your Bitcoin to fiat may be necessary if you have suppliers, wages, and bills to pay from the remuneration you’ve received. In this, you will need to create an account with an exchange that allows for cashing-out. Many of the exchanges only in cryptocurrency, so choose one that lets you convert to fiat (preferably one that will allow you to cash out to your local currency).

Advertising and getting the word out

Once you have gone through all the decision making and technical aspects of accepting Bitcoin as a payment medium, then you need to get the word out. Whether it is merely a sign on your shop door or a banner on your website home page, it is still getting the message to your customers.

Advertising doesn’t need to involve paying for advertising, although if you already have an advertising budget, you may want to include the new information on your next ad-run.

You can make your presence and Bitcoin acceptance known by providing links to websites related to cryptocurrency and Bitcoin in particular. People on these sites are often on the lookout for new places where they can potentially spend their Bitcoin (unless they’re HODLing for all their worth).

Write a short article about your decision to accept Bitcoin and plans you had to make, link it to your website. Use social media platforms to announce your “accepting Bitcoin” start date.

How much, how often and how persistently you advertise your Bitcoin acceptance is up to you and how essential Bitcoin acceptance is to your business needs.

Every silver lining has its cloud

Okay so far there has been no downside to accepting Bitcoin as a payment solution for your business, but there are potential issues that could arise from accepting cryptocurrency as payment.

Legality

While Bitcoin and its sisters are gaining popularity among people and businesses countries are actively discouraging its use, and others have actively banned the trading, owning or utility of cryptocurrency. You will need to check the laws in your jurisdiction, country-wide or individual state law in the US. If you have a cross-border trade, then you will also need to check with the countries you have contact with as you could open yourself and your clients to legal battles, or at the very least damage your brand image.  

Regardless of whether Bitcoin is legal or not, it still suffers the stigma attached from when it was used by the criminal element for anonymous transactions in the days of the Silk Road web application for illegal dealings. There are still old-school stalwarts who believe Bitcoin is o good for anything than money laundering and illegal activity.

Taxes

It’s unavoidable; you are going to have to pay taxes on your Bitcoin payments in the same way as you would your card and cash payments. In the case of cryptocurrency, it does get a little more complicated. The tax that you are liable for (in local fiat currency) is the value of the crypto-coin AT THE TIME OF TRANSACTION.

That means if you received 1 BTC in January when 1BTC >$17,000 and your taxes were due in May when 1BTC <$7000, you would be expected to pay taxes on the Bitcoin received at the rate of $17,000, not at the point of tax payment.

It is a good idea, even if you intend to keep your Bitcoin in storage rather than exchanging it for fiat, to cash out the taxable amount to cover your future liability. Cryptocurrency is volatile so don’t let it work against you.

Why should you?

One thing to consider before even contemplating the move to crypto acceptance is attitude, yours and that of your business. Are you pro-crypto? Is your business oriented toward crypto-positive demographics?  Can you really be bothered with the hassle of adding Bitcoin to your payment roster is you really aren’t that convinced that crypto will last? Conversely, is there any point to accepting Bitcoin if most of your customers or clients aren’t likely to have heard of (never mind use) Bitcoin?

If cryptocurrency continues along the path of increased popularity and continued development that it’s currently carving in the economic landscape, then early adoption of Bitcoin (or crypto in general) payment options could be a benefit to your business in the long-term. So far, cryptocurrency doesn’t show any signs of disappearing anytime soon.

If you are pro-crypto, then the acceptance of cryptocurrency as a payment option becomes self-explanatory. By adopting Bitcoin as a genuine medium of exchange for good and services it gains utility and increased utility leads to greater adoption across everyday events.

Even if you are crypto-neutral, it’s a good way of hedging your bets and gaining customers who are looking for retailers and service providers who will accept Bitcoin as a payments method.

Anti-crypto, and Bitcoin (or other) acceptance probably isn’t for you, right now. However, even if personal opinion leans away from crypto, your clients may be of a different viewpoint.

There more reasons to adopt crypto payment solutions than there are against, but it’s not for everyone. You can always catch up later if circumstances demand it.


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