Cryptocurrencies are a hot topic in the business world. The vast majority of small businesses have yet to strike a deal with these forms of payment, but that doesn’t mean there isn’t money to be made from it. If your company considers whether or not to accept Bitcoin payments and crypto payments in general, then this article will get you started on your way.
What Are Crypto Payments?
Cryptocurrencies such as Bitcoin and Ethereum are decentralized cryptographic networks that allow users to make secure online payments. At the same time, there are several different cryptocurrencies, all function in pretty much the same way. The main difference is the level of security and their relative popularity. While they aren’t legal tender (yet), they can be used to purchase goods and services like any other currency.
Why Would I Want to Accept Crypto Payments?
If your company is thinking about accepting cryptocurrency payments, you’re probably wondering how this could benefit you financially. Allowing customers to pay with these virtual currencies opens up a whole new customer base who would otherwise have been unable to shop at your establishment.
It doesn’t stop there, though. Cryptocurrencies are becoming more and more popular with each day that passes. With an increasing number of businesses accepting them as payment options, cryptocurrencies could soon be the norm when making online transactions. As cryptocurrencies continue to get mass adoption, small businesses should start asking themselves, “How do I accept Bitcoin?”
How Do I Accept Crypto Payments?
Accepting cryptocurrency is not all that different from accepting regular currencies. All you have to do is open up a digital wallet that will act as your virtual bank account. When customers want to purchase something using their crypto coins, they transfer the specified amount into your wallet through whichever coinage the business accepts (most commonly Bitcoin or Ethereum). At this point, it can either be converted into its cash equivalent or kept in the wallet for future use.
As for the transaction itself, it is possible to use cryptocurrency merchant services; they will process all of your crypto transactions behind the scenes. There is usually a monthly fee associated with these services; however, this should prove more economical than paying charges for using regular credit and debit cards at the point of sale terminals.
What Are the Risks?
Although cryptocurrencies are rapidly gaining popularity, they are still very much in their infancy when accepting them as a legitimate currency. While there is undoubtedly money to be made, companies that accept Bitcoin as payment and other crypto coins must remember that the volatility of cryptocurrencies makes them risky business partners. Since their value can fluctuate wildly from one day to another, you could find yourself with a massive debt on your hands if you don’t carefully monitor how many coins you have at any given time. Suppose this happens and you don’t immediately exchange what your customers paid for your goods and services into fiat currency (a form of legal tender such as US dollars). In that case, most of the value might disappear by morning and be worth almost nothing by tomorrow night (or it could go the other way and multiply in worth).
What are the tax implications and accounting challenges associated with accepting crypto payments?
As for taxes, the same rules generally apply if your customers pay with traditional currencies. The difference here is that the IRS only treats cryptocurrencies as property rather than actual legal tender; this means that you will need to keep track of all transactions associated with digital wallets on an individual basis throughout the year. While some businesses hire accountants to help them with this process, the cryptocurrency community has developed several apps and programs to track these transactions, which do it automatically.
Crypto payments are slowly becoming more popular, but they are nowhere near the norm. If you choose to accept them as payment for goods or services, then remember that their value can change dramatically overnight. You should also consider whether your company will immediately exchange coins into fiat currency immediately through the cryptocurrency payment gateway or convert what has been received at the end of each day. Either way, these transactions certainly have the potential for small businesses if approached correctly, so it’s worth investigating further before deciding whether to allow customers to pay with crypto coins. Just make sure you keep safe and don’t invest more than you can afford to lose!