For businesses that operate on a global scale, adopting Bitcoin is increasingly seen as a strategic move to bypass conventional banking fees, avoid lengthy transaction times, and sidestep the complexities involved in currency exchange.
Here is what you need to know before accepting Bitcoin payments.
Adhering to PCI standards and responsibilities
Like any payment gateway, maintaining PCI compliance safeguards payment details in a secure setting.
Although this typically involves credit and debit card data, and cryptocurrencies rely on intricate encryption and cryptography, you remain accountable for the payment information your store accepts, transmits, and stores.
Market volatility
The volatility of cryptocurrency is often linked to its youth as a financial phenomenon. Investors, in a bid to swiftly augment their assets, analyse the fluctuation of coin values and test the waters of price manipulation in the crypto market.
Holders of substantial cryptocurrency amounts, known as “whales,” can trigger dramatic price falls by offloading their assets, showcasing the significant sway they hold over market dynamics.
When you buy BTC, the valuation is also influenced by the extent of their usage. When cryptocurrencies are increasingly used for transactions and purchases rather than merely being held, their prices tend to escalate.
Certain cryptocurrencies, like Bitcoin, are engineered with a finite supply limit or are programmed for decreasing returns over time, making them scarcer as participation in the cryptocurrency arena widens.
This scarcity, coupled with growing interest, naturally leads to an elevation in their value.
Tax liability
Receiving cryptocurrency payments directly into a digital wallet requires you to report and exchange them for your local currency. The unpredictable nature of cryptocurrency values means this action could potentially modify the ultimate value received from transactions.
Additionally, a rise in the value of the cryptocurrency you hold could lead to unforeseen tax obligations. In places like the United States, where cryptocurrency is considered property for tax purposes rather than currency, any appreciation in value from the time of acquisition to conversion is subject to taxes.
For example, if you accepted an item’s payment of 1 Bitcoin when it was worth $10 and converted it at a time when its value had escalated to $100, the $90 difference is taxable as either capital gains or income.
Transaction fees for cryptocurrency are typically lower
Eliminating a central intermediary significantly lowers transaction fees. When small businesses process credit card payments, they typically face processing charges of approximately $0.25 per swipe and an additional 2% to 4% of the total transaction amount.
These expenses accumulate, leading many smaller retailers to set minimum purchase amounts for credit card transactions on their PoS systems. By adopting cryptocurrency, businesses can cut these fees to under 1% per transaction.
End note
For business owners, adding Bitcoin and other cryptocurrencies as payment options can easily expand the variety of payment methods offered to customers, possibly leading to lower transaction fees overall.
After getting a handle on the cryptocurrency regulations in your jurisdiction and devising a method to account for these transactions, integrating cryptocurrency payments into your business can be effortlessly achieved.
