Bitcoin is currently the most popular cryptocurrency widely acceptable as a payment method in various establishments across the globe. Several large brands like McDonald’s, Subway and Shopify recently began accepting Bitcoins as a form of payment. Customers can now pay for services and buy gift cards with cryptocurrencies.
However, not all businesses have embraced the idea of using cryptocurrencies. There is still a significantly huge percentage of business owners that remain reserved about the idea of adopting bitcoins as a payment method; for valid reasons. Here’s why you should be cautious when accepting bitcoins payments for your business.
You Could Lose Money Due To Bitcoin’s Volatility
The value of cryptocurrencies fluctuates every single day. Bitcoin has been one of the most promising cryptos due to the steady rise in value over the past few years. If you bought $50 worth of Bitcoins in 2013, it would be worth more than $8,000 today. This doesn’t mean it can’t plummet in value any moment now.
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The government does not regulate cryptocurrencies mainly because they only work on a peer-to-peer network. Their value is determined by supply and demand. This feature makes crypto immune to currency inflation but also means its value may go down before you have the chance to exchange it for fiat currency. For this reason, you won’t find many customers willing to spend their Bitcoins on small purchases. It only makes sense to accept Bitcoin for large purchases.
You Could End Up Paying More Tax and Transaction Fees
In 2014, the IRS decided to treat Bitcoins and other cryptos as property subject to taxation. Each time you sell, use or buy cryptocurrencies, you are subject to capital gains tax. For example, if a customer paid you $5,000 in Bitcoins last month when it was worth 10 per cent less, and today, it’s worth $5,500, and you use it to pay for a vehicle, the government views Bitcoins as an investment and requires you to pay capital gains tax on the $500 gain.
For large transactions over $10K, the taxes end up being way more than what you would have paid in fiat currency. Another major issue is transaction fees. Besides the regular bank transaction fees, you will have to pay other fees charged by the trading platform you will use to buy bitcoin. These fees are high, ranging from 1 per cent to 13 per cent, depending on the amount of money you will exchange.
It Poses Major Security Concerns
The cryptocurrency market is highly prone to scam. Millions of dollars worth of Bitcoins have been lost to hackers and scammers over the years. Some unknowing victims thought they were buying gift cards only to be scammed off their precious crypto. Moreover, if you happen to lose the access key to your crypto wallet, all the Bitcoins stored in it is lost. This is because there is no central record for wallet keys and addresses. Only the person who has the key has access to the wallet.
Also, every transaction is anonymous and irreversible. That is why criminals prefer trading using crypto. You must, therefore, really trust your customer if you will receive Bitcoins payments from them. All Bitcoins transactions are posted to a public ledger where anyone can see. So if your Bitcoins wallet information is somehow leaked or hacked, you and your customers’ funds are not safe.
It Is Tedious to Set Up and Maintain a Bitcoins Business Account
If you want to buy cryptocurrencies, the process is pretty straightforward. However, for you to accept Bitcoin payments to your business, you can either set up a new crypto wallet specifically for business transactions, use special plug-ins for your eCommerce platforms or use third-party exchange services. Either way, the entire setup process takes immense time and effort.
Moreover, you should be prepared to return payments one by one in case of refunds. Bitcoins transactions are irreversible, but the receiver of the money can manually send back funds to the sender. So, during high traffic seasons, prepare yourself and your employees for the hard work that comes with manually making refunds to your tens of customers.