Should You Accept Crypto For Payment in Your Business?

If your business has clients that are likely to want to pay with crypto, should you allow it? Since cryptocurrency first hit the currency market, it has caused excitement, disappointment and finally relegation. Even governments around the world are now adopting cryptocurrency as an official form of currency. But is it right for your business? After all, there are inherent volatilities in a currency that is non-regulated and controlled by an admittedly complex system that few truly understand. Before jumping headlong into accepting crypto for payment in your business, there are pros and cons to consider.

Benefits of Accepting Crypto For Payment in Your Business

There are several potential benefits to accepting cryptocurrency as a form of payment in your business. For businesses that embrace innovation and want to expand their payment options, crypto may provide an advantage in specific markets.

1. Expanding Your Customer Base

Accepting cryptocurrency opens your business to a broader, global customer base. Many cryptocurrency users prefer businesses that accept digital currency because it offers them flexibility and the ability to make quick, anonymous transactions. By accepting crypto, your business could appeal to tech-savvy customers or international clients who may find traditional currency exchanges too expensive or cumbersome.

Certain industries—like technology, gaming, or e-commerce—have seen strong demand for cryptocurrency payments. If your business operates in one of these sectors, accepting crypto could be a competitive advantage. If all that’s relevant to your business, it may be worth considering. But if you operate a smaller, local business, the fact that you accept cryptocurrency may be almost meaningless.

2. Lower Transaction Fees

Traditional payment processors, like credit card companies, typically charge transaction fees ranging from 2% to 4%. These fees can add up quickly, especially for small businesses or companies that process large volumes of transactions. Cryptocurrency payments, by contrast, tend to have lower transaction fees because they bypass traditional banking networks. However, the exact fee structure depends on the type of cryptocurrency and the payment processor or exchange you use. Some blockchains, like Bitcoin’s, may incur higher fees when the network is congested, while others like Litecoin or Bitcoin Cash offer cheaper and faster transactions. If transaction fees are taking a huge bite out of your profits, this could be a significant benefit.

3. Faster Transactions

Cryptocurrency transactions can be faster than traditional banking processes, often allowing you to take possession immediately upon confirmation of the transaction. While credit card payments may take a few days to clear and international transfers can be delayed by banking regulations, cryptocurrency transactions generally settle within minutes or hours, regardless of where the customer is located. This speed can be particularly advantageous for businesses that deal with large international orders or those that need faster cash flow without waiting for funds to clear through banks.

4. Protection Against Chargebacks

One of the unique features of cryptocurrency is that transactions are irreversible once confirmed on the blockchain. This eliminates the risk of chargebacks, which can be a problem with credit card payments. A chargeback occurs when a customer disputes a charge and the payment is reversed, often leaving the business to shoulder the financial loss. With crypto, the payment is final, and disputes over transactions must be handled directly between the business and the customer.

Risks of Accepting Cryptocurrency

Despite its benefits, there are significant risks associated with accepting cryptocurrency for business payments that cannot be ignored. These risks stem primarily from regulatory issues, price volatility, and the complexities of integrating crypto into standard accounting practices.

1. Price Volatility

Perhaps the most significant risk of accepting cryptocurrency is its price volatility. The value of cryptocurrencies like Bitcoin and Ethereum can fluctuate wildly in a short amount of time. A customer might pay you in Bitcoin when it’s worth $40,000 per coin, but by the time you convert it to cash, the value could have dropped to $35,000 or lower, even if you do the conversion within hours of receiving payment. For businesses that operate with thin profit margins, this volatility can make accepting cryptocurrency risky.

2. Regulatory Uncertainty

Cryptocurrency is still a relatively new technology, and many countries have not yet fully established how to regulate it. Tax authorities may have specific requirements for reporting cryptocurrency income, and these rules can change quickly. In the U.S., the IRS treats cryptocurrency as property, meaning businesses must track the value of the currency at the time of the transaction and report any gains or losses when converting it to cash. CPAs can help businesses navigate these regulatory requirements, ensuring proper compliance and minimizing the risk of penalties. However, the lack of clear regulations in some countries can make accepting cryptocurrency more complicated than traditional payment methods.

3. Integration With Existing Systems

Many businesses have established systems for accepting and processing traditional payments. Integrating cryptocurrency into these systems may require significant changes, particularly when it comes to accounting and reporting. For example, cryptocurrency transactions must be recorded as property exchanges, and businesses will need to track the value of each crypto payment in real-time.

4. Security Concerns

Cryptocurrency wallets and exchanges can be vulnerable to hacking, and unlike traditional bank accounts, there’s often no recourse if funds are stolen. Businesses that accept cryptocurrency must ensure they have strong cybersecurity measures in place to protect against potential theft. This might involve using secure wallets, two-factor authentication, and partnering with reputable payment processors that offer crypto support.

5. IRS Attention

Cryptocurrency is still relatively new, so if you want to get the IRS’s attention, accepting it for payment is a great way to do it. You can be doing everything aboveboard, but since crypto is the favored currency for some nefarious organizations, it still raises red flags with regulatory authorities like the IRS. If you decide to accept crypto, just be sure to keep perfect records and work with a reputable CPA.

Whether you’re a small business looking to diversify or a tech company eager to attract crypto enthusiasts, understanding the pros and cons of cryptocurrency payments is key to making the right decision for your business.

by Kate Supino

Please note - Garland Taylor CPA PC does not advise clients +/- regarding crypto. See issues above... and be sure to talk with your financial advisor and/or business attorney before entering into any such transactions. fyi