How Can My Business Accept Bitcoin and Cryptocurrency Payments?

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A growing number of businesses in both the UK and worldwide are starting to accept Bitcoin and crypto as an alternative payment method for goods and services.

But should your business be doing the same? You might be interested in adopting digital currency but perhaps you’re wondering how you go about allowing customers to pay with crypto?

Here I look at the pros and cons of businesses accepting crypto, whether you should consider doing it and how you go about accepting Bitcoin payments.

Should my business accept Bitcoin and cryptocurrency?

Bitcoin isn’t new. In fact, it’s been around since 2009 which, given everything that’s happened in the world since then, seems an age away!

The crypto ecosphere has rapidly expanded in this time and a growing number of businesses both large and small in the UK and worldwide are offering it as an alternative form of payment to their customers.

This is particularly relevant as shoppers continue their exodus from the high street to the internet.

However, there are several reasons why some business owners are reluctant to embrace this new digital money.

One of these is that Bitcoin and crypto in general still suffers from a PR problem.

A lot of people continue to associate crypto with illegal activity, or liken it to gambling.

But, while there are bad actors in the space, many cryptocurrencies and the underlying blockchain technology have brought huge benefits to the financial system.

Both the technology and many coins are now being embraced by some of the biggest financiers and asset managers in the world.

Another issue is that many people still don’t fully understand how cryptocurrencies work and see incorporating them into their businesses a technical hurdle too far.

The benefits of taking crypto payments

• It’s broadly accepted that crypto and blockchain technology is here to stay and businesses who position themselves ahead of the curve may well attract new customers.
• Accepting crypto can make your business appear progressive and willing to embrace change.
• New technologies are likely to appeal to a younger, tech-savvy crowd often with a high degree of disposable income.
• While the price of crypto can be volatile, the actual payment method is incredibly secure. Transactions cannot be faked and there’s no way that it can be reversed, thus avoiding chargebacks.
• The decentralised nature of most crypto transactions means that in most cases the fees are much lower and thus appealing to both customers and business alike.
• Although volatility still stalks the crypto market, cryptos are not impacted directly by inflation and may hold value long term when traditional fiat currencies are struggling.

How can my business accept cryptocurrency as payment?

Accepting crypto is becoming easier and cheaper and the technological barriers are gradually crumbling away.

There are a variety of ways a business can accept Bitcoin as payment, especially if your sales are made online through your website.

If you’re a small business or a freelancer the simplest way to accept crypto is via direct wallet-to-wallet transfers.

All you need to do is set up a free Bitcoin wallet (there are dozens of options available) and request payment be sent to your wallet address.

If you’re using a decentralised non-custodial wallet as opposed to a custodial wallet you’ll need to make sure you safely store your mnemonic seed phrase issued to you at the time of sign-up otherwise you could lose access to your funds.

You can read more about crypto mnemonic seed security here.

If you opt for a centralised wallet on an exchange such as Coinbase (there are many others as well) you’ll find the process much simpler – akin to opening a bank account – and you won’t have to worry about losing your keys.

You’ll also be able to sell you crypto for cash quickly and simply, although you’ll be charged a fee each time you transact on the platform.

If you’re planning to hold onto some of your coins, you might want to consider buying a crypto hardware wallet to secure your crypto offline.

If you’re looking for a streamlined and professional solution that can be incorporated into your company website, many of the big ecommerce platforms have introduced crypto integration enabling customers to choose this payment method at the point of sale.

Should I use a payment processor to handle my business’s crypto payments?

If you’re still unsure about engaging with crypto, you might want to consider using a payment processor to handle the transactions for you.

These companies take the stress out of setting up wallets and handling crypto payments by facilitating crypto to cash payments.

PayPal, for example, allows customers to use crypto as a method of payment and facilitates instant crypto to cash transactions as well.

Of course, there are fees involved so it might not be the cheapest way of accepting crypto payments but at least you won’t have to get bogged down in the technical side.

There are many other services on offer, and you’ll need to shop around to find the one that’s right for you.

Is my business liable to pay tax on crypto?

Whichever method you choose you’ll need to consider how you’re going to pay the tax owed on your crypto earnings.

This will vary depending on whether you plan to hold onto the crypto you receive as an investment or convert some or all of it into cash.

If you’re worried about reconciling the tax, there are a number of dedicated crypto tax software applications on the market to help you navigate your filing for HMRC or similar authorities.

Speedy Bitcoin payments using the Lightning Network

One development that is having a significant impact on crypto payments is the Lightning Network.

The Lightning Network is what’s known as a layer 2 payment protocol.

If you want to learn about the technical side of the protocol there are plenty of resources online, but for the purposes of this article I’m going to focus on what it means for businesses.

While standard Bitcoin transactions can be relatively slow, the Lightning Network is a micropayment system which uses smart contracts to make transactions quicker by taking them off the main Bitcoin blockchain.

There are considerable cost savings to be had as well, with fees on the Lightning Network lower than conventional transactions.

To use the Lightning Network you’ll need a compatible wallet, of which there are many free options are available.

It accepting crypto payments too complicated for businesses?

It’s fair to say there’s a reasonably steep learning curve to overcome in order to start accepting crypto for your business if you’re unfamiliar with the technology.

But there are thousands of guides online which should enable most people to get over this initial hump.

You might want to start out by buying some crypto for yourself and getting to know how wallets and exchanges work before you roll out the payment method to your business.

As I’ve already said, using one of the major exchanges as a home for your crypto removes many of the technical barriers, but there are drawbacks as well.

One of the most significant is that the exchange retains your private keys meaning that technically they control your money, although in reality this is only akin to the relationship you have with your bank or building society.

What are the risks to my business of accepting crypto payments?

I’ve talked about price volatility earlier in this article because this is definitely something you need to consider as a business owner.

Any crypto you accept, with the exception of stablecoins, has the potential change in value by the minute – both positively and negatively – making forward planning difficult.

Some people suggest converting your crypto to cash as soon as it’s received to try to avoid losing money if there’s a sudden crash. Equally, you could sacrifice profits by doing this if the market turns bullish.

Regulatory uncertainty is also a consideration as well as authorities across the globe are still working out how to treat crypto, with some choosing to ban it altogether.

Future changes in the law could have significant implications for the crypto market, and you need to ensure you’re up to date on the current regulations.

Another consideration is that crypto isn’t covered by the Financial Services Compensation Scheme meaning any coins you hold are not protected in any way.

Which cryptocurrencies should I accept?

There are thousands of different cryptocurrencies around today and navigating this landscape can be tricky.

A lot of these are junk which you shouldn’t touch with a barge pole. Sticking to the well know coins is a much safer bet.

Bitcoin (BTC) is obviously the most well-known crypto, followed by Ethereum (ETH), which is both a token and a blockchain and has a huge user base.

ETH is also the most popular token used in the world of Decentralised Finance (DeFi) and Non-Fungible Tokens (NFTs).

It’s also worth considering both Litecoin (LTC) and Bitcoin Cash (BTC). These are both popular coins which attract lower transaction fees than Bitcoin.

If you’re looking to accept crypto but are concerned about the price instability that’s rampant in the markets then you should consider stablecoins, which I mentioned earlier. Tether (USDT) is one of the best known and most widely used.

Stablecoins are cryptocurrencies that are pegged to a theoretically stable reserve asset, usually the US Dollar, but also precious metals such as gold.

They are designed to hold a steady price, subject to fluctuations between currencies, and are useful if you’re trying to avoid volatility.

However, stablecoin fees can be higher than other cryptos and there have been some concerns about coins becoming ‘de-pegged’ and crashing in value because the developers behind them don’t have the necessary assets to back the currency.

Conclusion

Deciding whether you company should accept crypto or not largely depends on your specific set of circumstances.

Delving into the world of digital currencies may seem daunting at first, but the technology is becoming ever more widely used and user friendly.

Yes, there are risks associated with crypto, but there are also potential rewards as well, not least the appeal they have among the younger generation.

It’s important not to write off this method of payment because you don’t understand the technology – successful companies remove barriers to purchase rather than create them.

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