Cryptocurrency is all the rage these days, with dramatic price swings virtually every day. But, after more than a decade, this kind of communication is finally making its way into the mainstream. Cryptocurrency is now actively traded 24 hours a day, seven days a week, and more than 30% of small firms in the United States accept it. Is cryptocurrency, however, appropriate for your small business? Before opting to adopt crypto, there are several critical considerations to make – both technical and pragmatic. We’ll examine all of the cryptocurrency considerations that small business owners should make, as well as how some blockchain businesses are attempting to advance the area.
Cryptocurrency is a digital medium of trade that is decentralized and based on peer-to-peer blockchain technology. To put it another way, no central bank or government regulates or supports cryptocurrency. Without the use of third parties to process payments, buyers transfer monies directly to sellers. In a transaction, cryptocurrency eliminates the intermediary. Rather than putting your money in the hands of an organization to keep it safe, you keep it safe with an encryption key that only you have.
Cryptocurrencies sound increasingly enticing to consumers searching for a safer way to do business as we hear more stories of data breaches and hackers becoming more skilled. As a result, small businesses might choose to accept cryptocurrency for a reason.
Cryptocurrencies have three key advantages over traditional point-of-sale (POS) systems that you should examine.
Lower Transaction Fees
Transaction fees are significantly reduced due to the lack of a central intermediary. Small businesses that accept credit card payments through credit card processing companies typically pay roughly 25 cents per swipe plus 2% to 4% of the overall transaction amount. These expenses pile up, which is why many POS systems in smaller establishments impose credit card purchase minimums. Accepting cryptocurrency reduces these fees to less than 1% of the transaction value.
The decentralized nature of cryptocurrency protects merchants from chargeback fraud. Because no third party may reverse charges, the transactions are final, just like cash. (To protect your business from fraudulent chargebacks, learn more about credit card receipt signatures.)
Crypto allows small businesses to expand and reach out to worldwide buyers who were previously unable to purchase their goods and services. One modest electronics store, for example, claimed to have sold $300,000 worth of items to nearly 40 nations by taking cryptocurrencies.
Cryptocurrency use is on the rise. As a result, more customers are using crypto. So, providing them with an additional payment method will improve your customer experience and provide an extra layer of protection from fraud.
Risks Associated with Using Cryptocurrency
While it is important to discuss the benefits, the risks associated with crypto should also be discussed.
Technical Stumbling Blocks
Accepting bitcoin necessitates the creation of a digital wallet on a digital currency exchange, which may be technically difficult for small business owners who are unfamiliar with the technology. Cryptocurrency is a densely information-rich subject with a steep learning curve, which can be a substantial roadblock to running a business. Small firms, in particular, would find it impossible to take cryptocurrencies as it stands now. Even if there are no technical barriers, the volatility of crypto values deters enterprises from holding digital currency.
Volatility of Cryptocurrencies
The most significant danger associated with digital money is price volatility, which makes its value exceedingly volatile. Bitcoin, for example, was once valued in pennies in 2009 and has now risen to almost $65,000 per coin in February 2021. You’ll need to make some kind of arrangement to convert your bitcoin back into your official money. Because cryptocurrencies are so volatile, you’ll want to do this as soon as possible and on a regular basis. Small companies can protect themselves from this volatility by using a merchant service firm like BitPay or Coinbase to exchange digital currency for cash. Payments for bitcoin are done in real-time for the currency’s current value using these services. The only rationale for a company to keep cryptocurrencies is as a speculative investment, but this is essentially gambling with your revenue stream.
Although the cryptocurrency system eliminates the chances of cyber threats like stolen credit card numbers, they are not entirely devoid of all forms of attacks. So far, there is still no guarantee that your wallets are 100% safe. This is a particularly disturbing concern as unlike formal currencies such as the US Dollar or Yen, crypto is not backed or insured. There are a few positive steps being taken in the same way. However, those protections will not be helpful in case your personal wallet gets compromised.
Accepting cryptocurrencies has another disadvantage: the regulatory landscape is likely to change in the near future. Regulations to govern it are now being drafted by legislators. Regulations will very certainly alter after they are in place, forcing business owners to adjust.
Because cryptocurrencies are so new, there’s a lot of speculation about how the government will iron out the flaws in its regulation. By the time you read this, new restrictions may have been enacted. Businesses will not take cryptocurrencies unless they are confident that they understand how to declare gains and pay proper taxes on cryptocurrency transactions. However, changes in cryptocurrency regulations will continue for the foreseeable future as its adoption increases and new problems and difficulties arise.
How to Accept Cryptocurrency?
If you decide to move forward and start accepting crypto payments then there are several steps that you need to take care of starting with the acceptor. You can either get a processor to accept the payments or you can do it manually. Using a processor might be easier as you have to simply register with a company like BitPay or PayPal.
Manual acceptance of payments might be more complicated. To accept payments manually, you’d have to register with a crypto exchange for users to send the payments. Then add a QR code to the website. Finally, you would have to shift the payments from the exchange to the digital wallet or convert them to physical currency and transfer to your bank account.