Cryptocurrency

Accept high-risk crypto payments like a boss.

Cryptocurrency pops in and out of mainstream news with headlines that inspire awe when Bitcoin rallies to all-time highs and something close to obituaries when its price falls. While cryptocurrency has mainly functioned as an investment to be bought low and sold high thus far, many developers and evangelists within the crypto space are working to deliver on its promise of functioning as currency.

In fact, a recent survey conducted by PYMNTS and BitPay found that 60% of Americans who have held crypto are interested in using cryptocurrency to make consumer purchases.

With credit card fees becoming a bigger and bigger burden on small businesses, merchants may now be more open than ever to low-cost, alternative payment methods and learning how to become a Bitcoin (and other cryptocurrencies) merchant. Below, we’ll walk you through how you can begin accepting crypto payments and the pros and cons of doing so.

The benefits of using cryptocurrency as a payment option

  • It’s safe and customers have full control over their transactions.
  • Don’t just reduce your chargeback ratio, crypto eliminates chargebacks!
  • A new payment option for customers who prefer cryptocurrencies.
  • A discreet payment method with the full privacy of your transactions.
  • Payments are stored securely in the blockchain ledger.
  • No fraud risks and do not share confidential information with the sellers.
  • Transaction fees are significantly low as compared to debit and credit cards.
  • Useful for international trips and can use the same currency in different currencies.
  • No third-party intervention.
  • No payment delays compared to conventional credit cards
  • Secured by an authentic digital signature.
  • Cross-border payment in real-time.
Bankcard was referred to me by my developer. From the jump, they were impressive. They were super responsive, they asked great questions and their solution was really robust. Also, working with Katherine and Hanna is a dream!
High risk merchant account
Emily Wallace
CEO

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Table of Contents

Understanding Cryptocurrency Payments

Cryptocurrency payments mean, in most contexts, trading crypto for goods and services similar to how you pay for it in dollars.

It should be noted, however, that cryptocurrency is not currently legally treated as currency anywhere in the world other than El Salvador (and that’s Bitcoin specifically), and China has banned crypto trading altogether. That said, in most countries, you can trade cryptocurrency as though you were trading property.

Since cryptocurrencies are generally designed with peer-to-peer transactions in mind, taking a crypto payment is as easy as transferring coins from one crypto wallet to another. This can typically be done by scanning a QR code or copying and pasting a hash code and doesn’t require any intermediary.

Pros & Cons To Accepting Crypto Payments

Cryptocurrency is a largely unregulated land of high contrasts, with amazing opportunities and shocking pitfalls. If you’re thinking about how to accept crypto payments as a business, you’ll want to weigh the pros and cons.

Pros

  • Low Fees: Though some blockchains (such as Bitcoin and Ethereum) can have expensive network fees during times of congestion, crypto payments can easily undersell credit card interchange fees and payment processor markups.
  • Borderless Transactions: It’s just as easy to send a crypto payment to someone overseas as it is to someone standing right next to you, and it has the same network fee.
  • Trustless Transactions: Bitcoin and most other blockchains were designed to cut out middlemen such as banks and processors, reducing the complexity and cost of taking payments.
  • Volatility: The crypto market is still in price discovery mode, with wildly fluctuating prices. The crypto you receive today may be worth substantially more a month later.
  • Innovation: There are a lot of interesting projects in the crypto sector that are attempting to address deficiencies in our existing financial system as well as in other networks.
  • Minimal Hardware Required: Unless you’re looking for a fancy POS system, you can take crypto payments with just about any internet-enabled device.

Cons

  • Lack Of Governance & Regulation: Crypto can feel like the Wild West, with legitimate projects and scams standing shoulder-to-shoulder. There’s not much recourse should something go wrong.
  • State Interpretations: Wyoming and New York (generally considered to be the most and least crypto-friendly states, respectively) have different regulatory approaches to crypto. While these may not be noticeable at the level of a simple payment, it can affect how easy it is to buy and sell certain coins, especially for cash.
  • Resolution Of Sales Disputes: While it may be nice not to have to worry about chargebacks, there also isn’t any built-in system for adjudicating disputes with your customers.
  • Volatility: Yes, this was also a pro, but the flip side to crypto’s volatility is that the coins you receive today could also be worth substantially less a month later.
  • Taxes & Uncertainty: While the IRS has guidance on how to treat crypto, navigating it can kind of be like trying to fit a square peg into a round hole. The federal government regularly threatens to pass regulations, but it’s still not entirely clear how — or even when — that will play out.
  • Scaling Issues: Scaling is an issue with older and more popular blockchains, such as Bitcoin and Ethereum. Bitcoin can handle around four transactions per second. In comparison, Visa’s network can handle about 1,700. Other chains are attempting to solve these scaling issues with varying degrees of success.

Get To Know Bitcoin & Other Common Cryptocurrencies

Because blockchains never really die, there are thousands of cryptocurrencies out there. You don’t need to know them all, but some names tend to come up more than others.

At the risk of alienating passionate supporters of certain chains, let me start with a disclaimer that the following list isn’t anything close to complete, nor is it a particular endorsement of any chain over another.

  • Bitcoin: The blockchain that started it all. Bitcoin makes up a plurality of the crypto market; when Bitcoin sneezes, the rest of the crypto market catches a cold. Though in many ways slower and more limited than the networks that followed, the level of investment in Bitcoin has earned it the moniker of “digital gold” within the crypto community. If there’s such a thing as a safe investment in crypto, it would be Bitcoin.
  • Ethereum: The second biggest chain by a significant margin, Ethereum has demonstrated that crypto can be far more than just a store of value. The network introduced decentralized applications (dapps) and the concept of smart contracts, which allow for more complex financial transactions. The non-fungible token (NFT) craze also began on Ethereum.
  • Cardano: One of a number of blockchains trying to solve the scalability and governance issues that have plagued Ethereum so far (at least until Ethereum 2.0 debuts). Though the methodical, academic blockchain has been slow to roll out features, it has an active and passionate community. With smart contracts now online, Cardano’s ecosystem looks ready to take off.
  • Solana: In contrast, Ethereum-competitor Solana has been riding a rocket in 2021, offering smart contracts and NFTs at low network fees, impressive speeds, and some big investors. A network shutdown in September suggests a “move fast, break stuff” approach, but the hiccup only briefly slowed Solana’s impressive momentum.
  • Polkadot: Polkadot is one of many projects seeking to build an “internet of blockchains,” essentially functioning as a hub connecting a network of “parachains.”
  • Dogecoin: The king of “meme coins,” DOGE began as a parody of cryptocurrency, descended from several forks of Bitcoin. The old, all-but-abandoned blockchain found unlikely billionaire champions in Elon Musk and Mark Cuban, whose advocacy has made DOGE one of the most recognizable coins in crypto. It’s also seeing a surprising amount of support from payment gateways as of late.
  • Litecoin: One of the more durable Bitcoin forks, Litecoin was envisioned as a faster version of Bitcoin and tends to be one of the more commonly supported coins among payment gateways.
  • Bitcoin Cash: Don’t let the name fool you; Bitcoin Cash isn’t Bitcoin but rather, like Litecoin, is a fork of Bitcoin. Similarly, it’s found a lot of support among payment gateways.

How To Accept Cryptocurrency Payments As A Business

The most important thing about learning how to accept cryptocurrency payments is that you don’t need a payment processor or payment gateway to take them. You and your customer just need to have crypto wallets that can take the same currency. These are typically available as mobile apps or browser extensions for desktops. Cold storage hardware wallets are also available for maximum security, although these can be inconvenient if you’re going to be handling a lot of transactions.

At the most basic level, cryptocurrency wallets are designed to receive or send payments simply by scanning a QR code or exchanging a secure hash code that can be copied and pasted into a text, message, or email. If you want the full functionality of a POS system or eCommerce checkout, however, you’ll want to consider a cryptocurrency payment gateway.

How To Accept Cryptocurrency Payments On A Website

If you are wondering how to accept crypto payments on your website, you need to generate a wallet address on your site for each sale. The customer would then use that code to send you the currency in question. This can be done without any formal integration and a relatively small amount of code.

The trouble with this method is that you’ll have to handle invoicing yourself. And you’d also have to build your own checkout system around it. For a more convenient experience, you’ll want to consider a cryptocurrency payment gateway. Though still on the novel side, cryptocurrency payment gateways are a more mature industry than you might expect, many of which integrate into popular eCommerce platforms, such as Shopify or WooCommerce.

How To Accept Cryptocurrency Payments In Person

Accepting cryptocurrency payments in person is even easier. You or your customer simply needs to scan the other’s wallet QR code and exchange the agreed-upon amount of cryptocurrency.

As is the case with eCommerce, however, this process may not smoothly integrate with your POS processes. Here again, a cryptocurrency payment gateway can provide a convenient interface for your customers. You shouldn’t need any specialized terminals to take crypto; any mobile device should do. The trick is finding terminals that can seamlessly process both EMV/NFC card transactions and take crypto payments.

While uncommon, there is hardware designed to do just this. Bitpay, for example, integrates with the Poynt open commerce platform, Smart Terminal.

What You Need To Set Up Cryptocurrency Merchant Services

As we touched on above, there are advantages to using a cryptocurrency gateway if you plan to take more than just the occasional cryptocurrency payment. These are services designed to work crypto payments into the normal flow of your business with minimal disruption.

Cryptocurrency merchant services come in both custodial and non-custodial forms. “Custodial” in this case refers to whose hands the ownership of the cryptocurrency in question will pass through. The more minimalistic crypto payment gateways are non-custodial, meaning the service never takes control of the coins. Custodial accounts, on the other hand, limit your exposure to cryptocurrency, allowing you to take it as payment but never actually take possession of it until the time of payout (or never, if you choose to be paid out in cash to your business bank account).

Each approach has pros and cons, and setting up a custodial account will usually be a more involved process with more screening than a non-custodial one.

What You Need To Get Started With Crypto Payments

To sum up, here’s what you need to take crypto payments:

  • A Crypto Wallet (Optional): Unless you’re using a custodial payment gateway and never settling in crypto, you’ll need a crypto wallet or wallets that are compatible with the cryptocurrencies you want to take.
  • A Customer With A Crypto Wallet: Your customer needs to be able to send you crypto.
  • A Crypto Payment Gateway (Optional): If you want to integrate cryptocurrency payments with your existing eCommerce or POS systems, you’ll probably need a crypto payment gateway service.
  • A Website (Optional): If you’re taking crypto payments for eCommerce, you’ll need a website.
  • A Terminal (Optional): Any mobile device can serve as a crypto terminal in a pinch, but if you want all your POS transactions in one place, you may wish to investigate compatible hardware options.

Choosing A Crypto Payment Processor

Though crypto payment processing is still a fairly small niche, there are a number of services available that attempt to streamline crypto payments into a more familiar checkout process. These services can help reduce your exposure to crypto volatility, integrate crypto payments into existing eCommerce and POS platforms, and make it easier to take multiple cryptocurrencies without fumbling through a dozen crypto wallets.

And since cryptocurrency is still a largely unregulated free-for-all, you’ll want to choose a payment gateway with a good reputation. Check out our list of popular cryptocurrency payment gateways for a deeper look at these services.

How Much Does It Cost To Accept Cryptocurrency Payments?

The cost to accept cryptocurrency payments can vary depending on how you go about taking them.

The first thing to consider is network fees. These are the fees charged by the chains themselves whenever coins are sent from one address to another. In most cases, this fee is paid by the person sending the payment, so by default, your customer would be paying this fee. You would, of course, also pay these fees when you send money to another address. These fees can vary greatly depending on the cryptocurrency and current network congestion levels.

If you’re using a crypto payment gateway, you can expect around 1% per transaction fee. Monthly fees are currently rare for these services, but some do charge a small fee to deposit crypto or cash into your personal or business accounts.

Challenges With Bitcoin & Other Crypto Payments

As cheap and relatively simple it is to pay with cryptocurrency, there are still some issues to consider before you dive in head-first. Here are some factors to consider.

Ideal industries for Cryptocurrency

  • Investment and Credit Services:
    • Securities brokers; mortgage consulting or debt reduction services; credit counseling or repair; real estate opportunities; investment schemes
  • Restricted Financial Services:
    • Check cashing, bail bonds; collections agencies.
  • Intellectual Property or Proprietary Rights Infringement:
    • Sales, distribution, or access to counterfeit music, movies, software, or other licensed materials without the appropriate authorization from the rights holder
  • Counterfeit or Unauthorized Goods:
    • Unauthorized sale or resale of brand name or designer products or services; sale of goods or services that are illegally imported or exported or which are stolen
  • Regulated Products and Services:
    • Marijuana dispensaries and related businesses; sale of tobacco, e-cigarettes, and e-liquid; online prescription or pharmaceutical services; age-restricted goods or services; weapons and munitions; gunpowder and other explosives; fireworks and related goods; toxic, flammable, and radioactive materials; products and services with varying legal status on a state-by-state basis
  • Drugs and Drug Paraphernalia:
    • Sale of narcotics, controlled substances, and any equipment designed for making or using drugs, such as bongs, vaporizers, and hookahs
  • Pseudo-Pharmaceuticals:
    • Pharmaceuticals and other products that make health claims that have not been approved or verified by the applicable local and/or national regulatory body
  • Substances designed to mimic illegal drugs:
    • Sale of a legal substance that provides the same effect as an illegal drug (e.g., salvia, kratom)
  • Adult Content and Services:
    • Pornography and other adult materials (including literature, imagery and other media); sites offering any sexually-related services such as prostitution, escorts, pay-per-view, adult live chat features
  • Multi-level Marketing:
    • Pyramid schemes, network marketing, and referral marketing programs
  • Unfair, predatory or deceptive practices:
    • Investment opportunities or other services that promise high rewards; Sale or resale of a service without added benefit to the buyer; resale of government offerings without authorization or added value; sites that we determine in our sole discretion to be unfair, deceptive, or predatory towards consumers
  • High-risk businesses:
    • any businesses that might pose an elevated financial risk, legal liability, or violates card network or bank policies

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