Accepting cryptocurrency payments continues to grow in popularity, but not everyone understands how it works. If you are a business owner and are considering accepting cryptocurrency payments but don’t know where to start, this guide is for you. Read on to learn more about the process of using crypto for online transactions, as well as its benefits and risks.
How Paying with Cryptocurrency Works
The process of using cryptocurrency for online payments is as easy as sending and receiving money from a bank account, but it also depends on the crypto platform you choose.
Setting Up Your Crypto Wallet
Acquiring cryptocurrency does not necessarily require you to create an account with a company, institution, or other entity. It is, however, easier when you do, especially when you’re unfamiliar with how to set up a crypto wallet.
If you set up an account with a crypto exchange, you can swap your crypto for cash. Plus, you can also enjoy other features, such as contacting support when you experience issues.
The only way you can process an online payment using crypto is if you have a wallet set up. You then generate a QR code that links to your wallet and give the code to your customer. They scan the QR code and enter their access key, which acts as a sort of password, and the transaction appears on the blockchain.
Your wallet is not required to store crypto at all times. You can just use it as a key for making online transactions. Think of it as the email address you should input when sending and receiving crypto payments.
There are several types of wallets available, and each has its own features. However, not all wallets are compatible with all crypto.
Sending and Receiving Crypto Payments
After acquiring a wallet, you can use it to make online crypto payments. In general, you can follow a step-by-step process when sending payments:
- Open your mobile wallet application
- Click the Send Payment button
- Enter the corresponding amount
- Enter the recipient’s wallet address or scan the QR code
- Finish the transaction by clicking the Send button
Conversely, you can follow this for receiving payments:
- Open your mobile wallet application
- Click the Receive Payment button
- Click the Share Address button
- Accept the payment that appears
Where Crypto Payments Are Accepted
Cryptocurrency is growing and changing, and today, many big platforms accept it for online transactions. Most companies that allow crypto payments utilize cryptocurrency payment gateways, which are payment service providers that ensure no price slippage occurs. (Price slippage is the price difference between a crypto’s quoted price and paid cost.) These gateways achieve this by guaranteeing real-time cryptocurrency-to-cash conversion.
Notable businesses that accept crypto payments include PayPal, Microsoft, Newegg, Starbucks, AT&T, and AMC Theaters.
The Pros of Using Crypto for Online Payments
1. Enhanced Payment Security
Frauds related to transactions made through debit and credit cards are on the rise. More often than not, small businesses are the primary target. Today, more professionals believe cryptocurrency is a safer way of making online transactions.
For starters, there’s no third-party verification needed. Because no data is stored with crypto, it cannot be breached. Instead, the crypto wallet stores all information collected.
There’s also the blockchain general ledger. It verifies and records all transactions, and because of its security, it’s almost impossible for bad actors to commit fraud and steal another individual’s identity.
2. Lower Fees
Transaction fees are common among online merchants. For instance, PayPal charges 4 percent for every fiat transaction, but it charges a flat fee for cryptocurrency transactions, as low as $0.49.
Overseas customers can also avoid paying international currency fees when using crypto because crypto is not linked with any national bank or country.
The Cons of Using Crypto for Online Payments
1. It Can Still Be Risky
While crypto is immune from inflation, its value remains volatile and unpredictable. This unpredictability makes most business owners hesitant about utilizing it for online payments.
2. They Are Not Exempt from Tax
Cryptocurrency payments are reported as gross income. These are based on fair market value during the time these payments are received.
Every time you use crypto in buying or selling, it’s subject to capital gains tax. And according to the IRS, it’s important you keep track of the crypto’s value during the day you received and sold it. If you’re receiving multiple crypto transactions daily, this can get complicated.
3. Crypto Transactions Are Irreversible
All cryptocurrency payments are permanent. When customers ask for refunds, it’s your duty as a business owner to keep track of all your records and identify the crypto’s corresponding value.
This can cause inefficiencies and additional work for your business staff, especially when you need to issue several refunds.
They Are Unregulated
After completing an online transaction using crypto, the blockchain locks it. As mentioned, every purchase made is permanent and cannot be undone. Cryptocurrencies are also not backed, regulated, or guaranteed. If you experience scams or fraud, there’s no guarantee you can get your money back.