Take a look at these pragmatic and technical considerations before you accept cryptocurrency.
- Cryptocurrency allows for direct transactions with no third-party processors.
- The government doesn’t regulate or back cryptocurrencies.
- Cryptocurrency can be used to pay for your business, but it may also lower transaction fees.
This article is intended for small business owners and entrepreneurs who are interested in cryptocurrency as a payment method.
With wild price fluctuations almost every day, cryptocurrency is hot. This medium of exchange has been around for more than 10 years and is finally making its way into mainstream. According to Skynova data, cryptocurrency can be traded 24 hours a day and more than 30% of small U.S. businesses accept it.
Is cryptocurrency the right choice for your small business? Before accepting cryptocurrency, there are many important considerations that you should consider. We will discuss the various cryptocurrency considerations small business owners need to consider, and also examine the efforts of blockchain startups in pushing the space forward.
What is cryptocurrency?
Cryptocurrency, a digital exchange medium that uses peer-to-peer technology called blockchain technology, is decentralized. Cryptocurrency is not regulated by any central bank or government. Without the need for third parties to process payments, buyers can transfer funds directly to sellers.
Chris Poelma is the CEO of PCS Software Inc. He stated that cryptocurrencies “cut out the middleman in transactions” and “you hold your money through an encryption only a key can access.” Consumers looking for a safer business model are becoming increasingly interested in cryptocurrencies as they hear more about data breaches and hackers getting more sophisticated.
Many reasons might lead small businesses to accept cryptocurrency. It is at the forefront in technology, can be attractive to customers who use it, and eliminates fraud. Is it the right choice for you?
Accepting cryptocurrency has many benefits
There are several main benefits to cryptocurrencies that can be compared to traditional point-of sale (POS) systems.
Transaction fees are lower: There is no central intermediary, which dramatically reduces transaction fees. Accepting credit card payments through credit card processing companies can often charge fees of between 25c and 4% for each swipe. These fees add up quickly, so smaller shops often require credit card minimum purchases on their POS systems. These costs can be reduced to less than 1% by accepting crypto.
Merchant protection: Crypto’s decentralized structure also protects merchants against fraudulent chargebacks. Transactions are like cash and cannot be reversed by third parties. Learn more about signatures on credit cards to protect your business from fraudulent chargebacks.
Accepting cryptocurrency comes with risks
There are downsides to cryptocurrency. These are the potential risks associated with accepting cryptocurrency.
To accept cryptocurrency, you will need to set up a digital wallet at a digital currency exchange. This can be prohibitive for small businesses that are not familiar with the technology. The information-dense field of cryptocurrency can prove difficult to navigate when trying to run your business.
Price volatility is the greatest risk associated with digital currency. This makes its value highly unpredictable. Bitcoin, for example, was initially valued at pennies in 2009. However, its value soared to over $65,000 per coin by February 2021.
Areiel Wolanow is managing director at consulting firm Finserv Experts. He stated that “you will need to make some arrangement for translating your cryptocurrency into your currency of choice.” “Cryptocurrencies can be volatile so you’ll want to do it quickly and frequently.”