Recent times have proven that digital currencies can revolutionize the business sector. People buy cryptocurrencies and pay for goods and services in the same currency. Following the flooding of cryptocurrencies in the digital world and their prominence in stock markets, the need to facilitate crypto payments arose. Business Merchants in platforms such as Etsy and Shopify have begun accepting BTC payments with the support of Coinbase commerce and Bitpay. These latter payment processing companies are intermediaries that offer free setup to allow businesses to accept bitcoin payments worldwide. Before setting up and approving crypto payments in your business, consider the following tips in this article.
1. Irreversibility of transactions
Once you pay with BTC, you can’t reverse it. Instead, it would be best if you asked for a refund. The party that can refund is the recipient of the payment. This factor is essential in business transactions because, at times, customers may need refunds, and the business must issue them. The merchants and customers need to develop a high level of trust because of this irreversibility; this calls for proper monitoring of these crypto payments as they come in.
2. Crypto Inflexibility
For businesses to operate correctly, several costs are incurred. These may include salaries for workers, supplies payments, and premises rent. Receiving digital currency payments from customers would generally mean that the merchant will also have to pay for the costs mentioned in the same currency. As opposed to their recent popularity in the last decade, cryptos have not yet become familiar to most of the world’s population. Therefore, the concerned parties demanding payments would prefer having them in cash or any other standard means rather than in crypto.
3. Tax consequences
Taxes can be harsh but are inevitable. In 2014, the IRS decided that cryptos could be taxed, and specifically, this crypto would be issued taxes just like property. Any business that wants to accept crypto as a payment method would have to record the payments as gross income based on the fair market value on the date received. Capital gains tax is charged anytime you buy, sell or pay in this crypto.
4. Value tracking
People sell and buy cryptocurrencies; therefore, there is a need to keep track and record the value on the date received and the date sold. You may also need to consider all the other factors that may facilitate a value fluctuation on the owed amount. Specifically, it is best not to accept crypto payments on regularly purchased goods for small businesses because of the value tracking. However, small business owners are advised to preserve virtual currency payments for luxurious or unique goods or services to minimize track keeping of the values.
5. Anonymous transactional payments
Crypto transactions are untraceable. This makes it vulnerable to cons and hackers who may steal your money or trick you into sending them your cryptos. Some countries don’t accept cryptos like bitcoin, which are rendered illegal because of their malpractices. If you want to allow crypto payments for your small business, you will have to be updated on the rules to face the thriving problem that needs additional regulation.
6. The volatility of its value
With the steady rise in the value of this crypto in recent years, many people with this currency tend to shun spending it. Today, the value of 1 BTC is 120 times more than it was in 2014. The prospects indicate that the value may continue to rise. Therefore, getting customers that pay in the currency may be a problem in itself. A pivotal point to consider thereof is that the value may fluctuate either in your favor or negatively. The only way to avoid this currency uncertainty is to cash in your BTC payments right after receiving them.
7. Unrecoverable wallet addresses
In case you, as an online merchant, lose your key to your wallet, you can never recover it. Records of wallet addresses, or cryptographic keys are not fundamentally recorded, which means if you lose your wallet, you lose all your crypto. This may not be a good position for your business to facilitate operational costs from such a loss.
If you cannot allow BTC payments, you may encourage your customers to buy gift cards with cryptocurrencies to enjoy your services. Buying gift cards eases the process of cryptos’ transaction complexity, which requires you to record the price of buying and selling them. Buy bitcoin and pay for your goods and services in businesses that accept bitcoin payments.