Should You Accept Cryptocurrency at Your Small Business? Learn the Pros and Cons

By Kristen Corpion

May 22 is referred to as “Bitcoin Pizza Day,” because on that day in 2010, a programmer named Laszlo Hanyecz engaged in what is widely considered to be the first cryptocurrency commercial transaction: he bought two pizzas with 10,000 bitcoin. Given the current price of bitcoin, that works out to over $170 million per pizza.

Twelve years later, bitcoin is more mainstream, especially in the worlds of technology and investing, but businesses that accept any form of cryptocurrency are still considered fairly exotic.

However, if the evolution of cryptocurrency as a means to transact business follows the typical technology adoption curve, today’s early adopters will soon be joined by many others. So should your business start accepting cryptocurrency as payment for goods and services? It depends. It will inevitably become a more seamless process, but today there are still some complications and risks you need to be aware of—and also many potential benefits.

Pros and cons of accepting cryptocurrency

When it comes to cryptocurrency, one person’s “con” is another’s “pro”—so whether your business should transact in cryptocurrency depends heavily on your goals and appetite for risk.

Pro: Payments are irreversible

The fact that crypto payments are irreversible is a benefit to businesses. Only the business receiving the payment can issue a refund—there is no third-party payment processor who can claw back a payment in response to a baseless fraud claim.

Pro: No payment processing fees

In addition, unlike with credit card transactions, there are no “middle-man” payment processing fees with crypto transactions. Because it is a digital currency that doesn’t flow through a bank or other third party, there are no fees required for a customer to transmit and a business to accept bitcoin.

It’s important to note, however, that there are fees involved for a business to convert bitcoin to dollars, should it choose to do so. Companies such as Coinbase provide merchant services (for a fee) that immediately exchange digital currency for its cash value.

Pro: Opens a business to new markets

An often overlooked benefit to a business of accepting cryptocurrency is that it can open a business—especially one with e-commerce capabilities—to new markets, both domestic and overseas. The cryptocurrency community is a tight-knit one that tends to support businesses who enter the crypto fray. And overseas sales can become more feasible and affordable because the high fees and transaction costs typically required when traditional currencies are used are eliminated.

Con: Regulatory and tax uncertainty

One of the major obstacles stopping more businesses from accepting crypto is regulatory and tax uncertainty. Currently, the IRS treats cryptocurrency (which it calls “virtual currency”) as property for federal income tax purposes.

This means that a business owner must maintain careful records of transactions, because if a business owner exchanges virtual currency for what the IRS calls “real currency” (i.e., U.S. dollars), then the business owner must recognize any capital gain or loss on the sale, based on the fair market value of the cryptocurrency when received.

Pro and con: Crypto's price volatility

For some businesses and entrepreneurs, crypto’s price volatility is terrifying. For others, that’s the value proposition. After all, $100 worth of bitcoin in early 2019 was worth more than $1,000 in early 2022—a more than 10x return. However, bitcoin has since tanked, although (as of mid-June, 2022) it’s still valued significantly higher than it was in 2019. The point is, if you decide to accept crypto, buckle up.

A risk to consider

A final risk to mention is that if your business has a regulatory scheme in place that affects how you receive payments from clients or customers, it is important to understand the impact of accepting cryptocurrency.

For example, as a law firm owner, before I began accepting crypto payments from clients, it was critical for me to understand how to do so in a way that is consistent with the ethical rules that govern attorney/client relationships, including the payment and handling of fees.

More articles from AllBusiness.com:

• 10 Hot Digital Marketing Trends We’ll See in 2022
• Digital Currencies, Blockchain, and the Future of Business Transactions
• 5 Latest Payment Trends Impacting Small Businesses—Are You Keeping Up?
• SMBs: It’s Time to Embrace AI Technologies or Risk Falling Behind
• How Smart Businesses Can Adapt to Consumer Behavior and Marketplace Trends

Steps involved for a business to accept crypto

For a business that has decided that the pros of accepting crypto outweigh the cons, the next step is to go through the logistical process of getting set up to transact in digital currencies. The good news is that you don’t need to be a technology expert to get started.

1. Establish a crypto wallet

This first step is establishing a crypto wallet, which functions like a bank account that you’ll use to send and receive digital money. Some wallets can only be used for a single cryptocurrency, such as bitcoin, while others store multiple currencies. There are many different wallet options to choose from.

Another important consideration when it comes to choosing a wallet is security. Unfortunately, cybercriminals look for opportunities to steal crypto, and the way in which a business or individual holds its currency can make it more or less vulnerable to attack. Generally speaking, “cold” wallets, which are not connected to the internet, tend to be more secure than “hot” wallets, which are connected. However, while using a hot wallet may be less secure, for many that risk is outweighed by the convenience of being able to seamlessly transact over the internet.

2. Choose a payment processor

To the extent that a business wants a means to convert cryptocurrency into dollars, it must choose a payment processor, such as Coinbase, BitPay, or CoinGate. Since some providers serve as both a processor and a wallet, you may be able to complete both steps in one.

3. Determine how to accept crypto payments

A final step is figuring out how you will accept cryptocurrency payments—such as through your website—and procuring and configuring the right technology in order to do so. It’s not as complicated as it may seem. If your business plans to accept cryptocurrency payments through its website, and it has already established a digital wallet, it may be as simple as adding a plugin on a Shopify or WordPress website.

Should your business accept cryptocurrency?

That’s a question only you can answer, but hopefully you now have a better idea of what is involved.

A recent study reported that 56% of American adults either own or have owned cryptocurrency, and nearly 18% of American adults that have never owned cryptocurrency plan to buy some in the next year, so it is a growing market that your business may choose to tap into.

RELATED: 4 Poor Money Habits That Are Leading You to Become Business Broke