All Your Questions Answered About Accepting Crypto as Payment
Aug 15, 2022 4 minute Read
If you’ve been following the news, you’ll know that cryptocurrencies have been on a rollercoaster ride. While there are still many questions surrounding crypto, one thing is clear: it’s here to stay.
In fact, business owners from all industries should start considering accepting cryptocurrency payments for their goods and services. Here’s what you need to know about accepting crypto in your shop.
Why accept cryptocurrency in your business?
Cryptocurrency is the future. It’s not only here to stay, but it’s also a technology that will continue to push the boundaries of what we know about money and commerce today. Businesses that accept Bitcoin are showing their customers they’re forward-thinking and open to new ideas. This can help you attract new customers and increase your brand loyalty by making your e-commerce business more accessible than ever before.
Currencies like Bitcoin and Ethereum have been around since 2009, but most people haven’t heard of them until recently when their value skyrocketed in 2017.
How can my shop accept cryptocurrency?
Crypto is still in its infancy, with many people telling stories about how it’s going to change the world. However, even if crypto does become mainstream in the future—and we believe it will—there are plenty of reasons why your business should begin accepting cryptocurrencies as a payment method today:
- Customer convenience: When customers make purchases at your store using crypto instead of cash or credit cards, there’s no need for them to hand over their personal information like an ID or a credit card number. This makes purchasing items more convenient for shoppers who prefer privacy when spending money online.
- No transaction fees: Credit card companies charge businesses up to 3% on each purchase made with plastic; if you’re selling something priced at $100 per item and get charged $3 convenience fees on nearly every sale equalling dozens per day throughout the year—that adds up fast! By accepting crypto as payment option instead, you can avoid such charges (depending on the processor).
What is the best way for a small business to accept crypto?
There are several ways to accept cryptocurrency as payment for your business. The most popular option is to use a crypto payment processor, which allows you to accept multiple types of crypto payments including Bitcoin, Ethereum, and Litecoin.
You can also choose to keep your own private keys with a cryptocurrency wallet such as Exodus or Electrum, but this requires more technical knowledge on the part of your customers.
Another option is using a cryptocurrency exchange such as Binance or Bitstamp, which will allow you to convert bitcoin into dollars (or vice versa) before sending it off to another user who accepts bitcoin payments by using their own wallet address instead of yours. But this method can get confusing and messy when tax season comes around, not to mention the volatility of the crypto market means you might cash out for less than the initial deposit.
What are the top crypto coins in terms of market share and value?
Bitcoin is the first cryptocurrency to be created and it’s still considered to be the most popular one. It’s often referred to as the gold standard of cryptocurrencies, even though its value has been on a steady decline since last year.
Ethereum is another option if you’re interested in accepting crypto coins as a form of payment, because it’s an open-source platform that allows developers and users to create decentralized applications (DApps). DApps are built on top of blockchain technology and can be used for things like voting or keeping records. Ethereum also allows people to create tokens which represent an asset (think NTFs) or utility and can be used for everything from buying goods online to paying for electricity bills via smart contracts.
Ripple is yet another type of virtual currency that has become popular recently thanks largely due its association with traditional banking institutions like Santander Bank or Western Union. Ripple coins are called XRP, not surprisingly since they were created by Ripple Labs Inc., who also developed their own network protocol called Interledger Protocol (ILP) which enables transactions between different ledgers (e.g., Bitcoin vs Ethereum).
Otherwise, the most popular and stable crypto coins include:
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
- Litecoin (LTC)
- Dash (DASH)
- Monero (XMR)
- Zcash (ZEC)
- Dogecoin (DOGE)
Calculating the value of crypto payments.
Cryptocurrency prices can fluctuate wildly, and sometimes the value of a coin can change dramatically in just a few hours. It’s not always stable or predictable.
Cryptocurrency is volatile—prices for coins can change rapidly, sometimes within minutes of being bought or sold. This makes it difficult to know how much you will receive from a cryptocurrency payment when calculating how much to charge for your goods and services.
Some wallets do provide a benefit of stabilizing the value at the time of your deposit.
What are the tax implications for a business that accepts cryptocurrency?
In general, the IRS treats cryptocurrency as property for federal tax purposes, which means it will be subject to capital gains taxes when you sell or trade it. You must also report any income received, such as when you exchange one cryptocurrency for another or use it to purchase goods and services.
The IRS gives taxpayers a choice of how they report this income: They can either treat each transaction as a sale that’s subject to capital gains taxes on any increase in value since they acquired the currency (even if the value drops back down later), or they can account for each transaction individually throughout the year by tracking cost basis and adjusting their taxable income accordingly.
Even if your business has sold all its bitcoin and converted it into US dollars at some point in time during the tax year, you may still have some reporting obligations if this was part of an ongoing trade or business activity.
Can an LLC have a crypto wallet?
You can definitely have a crypto wallet and use it as an LLC’s bank account. However, you may need to register with the IRS as a money transmitter if your business receives payments over $10,000 in cryptocurrency. If you’re looking at this as a way for your business to accept payments for goods and services, then using a crypto wallet makes sense because there are no processing fees involved—the only fee is the cost of buying cryptocurrency from an exchange like Coinbase or Gemini (which charges 1% plus 0.25% per transaction), and then selling it back on another exchange when paying for things like rent or supplies.
This means that if you’re operating under an LLC structure and want your employees (or yourself) paid in cryptocurrency instead of fiat currency, then setting up a wallet could be very helpful given that there won’t be any processing fees associated with transactions outside of buying/selling coins themselves (and even then they’ll still be less than what most banks charge). The best part is that all these transactions are easily done online through exchanges like Coinbase so there isn’t much work involved besides opening up accounts with each one.
Start accepting cryptocurrencies as a form of payment for your goods and services.
Fortunately, when it comes to accepting cryptocurrency as payment, there are plenty of options out there that make it easy to do so.
- Set up a digital wallet: You’ll first need to set up a cryptocurrency wallet (or multiple wallets). Wallets provide the means for you to securely receive and store cryptocurrency. The most popular types of wallets include browser-based web wallets, mobile apps for iOS or Android devices, desktop software like Exodus or Jaxx, hardware devices like Trezor or Ledger Nano S (a small USB device), which allows users to sign transactions without exposing their private keys on an insecure device like their computer or phone.
- Choose your processor: If you plan on using some sort of third-party processor such as Bitpay or Coinbase Commerce (which connects directly with your online store’s checkout page), then this step isn’t necessary since they will handle everything automatically once connected. However if we want control over our own transactions then we need some kind of gateway plugin which allows us access through our website’s back end code so that we can manually send out payments ourselves instead of relying solely on third parties such as BitPay who charge hefty fees per transaction depending how much money is being processed at once (such as $0-$100) whereas Bitcoin Core Wallet only requires 5 cents per transaction regardless how much money being processed at once.
- Find a digital payments gateway: You’ll need a payment gateway whose API allows for integration on your e-commerce platform (e.g., Shopify, WooCommerce). The best ones will allow you to manage online payments with full control over which types of cryptocurrency you want to accept as well as traditional methods of payment.
One of the best benefits of accepting crypto is the impact it has on chargebacks for your business. Because crypto transactions are saved on a digital ledger on the blockchain, there’s no denying who purchased what and when.
Speak with our team of crypto payment processing experts.
Cryptocurrencies are becoming more and more popular, and there’s no denying that they have a lot of potential to revolutionize the way we use money. As the world becomes more connected through technology, it’s important for businesses to keep up by embracing new methods of payment such as cryptocurrency.
Our team here at DirectPayNet understand the need, the value, and the potential accepting crypto has for your business. Get in touch with us now to connect with a crypto payment processor and prep your business for the future of commerce.