The popularity of cryptocurrency has continued to grow and it is now an accepted medium of exchange for conducting transactions in mainstream circles.
There are many reasons for its popularity, but most people are adopting it largely because it is free from regulation and cuts out the middleman.
You won’t have to pay any fees to a bank or payment processor for online payments and fund transfers.
So, how do you start accepting crypto payments from your customers?
In this article, I will show you how cryptocurrency transactions work, and how to enable crypto payments on your business website.
How To Accept Crypto Payments: Frequently Asked Questions
Here are the questions business owners are asking on search engines about accepting digital currency from their customers:
Is It Illegal To Accept Cryptocurrency?
Cryptocurrencies are not illegal, but they are also not backed by the central bank or government.
The government is still working out how to regulate the industry, so you must stay alert to any new regulations that may be introduced by the government.
Should You Accept Crypto Payments On A Website?
If a significant portion of your customers prefers digital currencies as a payment method, then you can go ahead and accept them.
Take the time to research cryptocurrencies and understand the risks involved, then take steps to protect your business.
What Is The Risk Of Accepting Cryptocurrency?
The biggest risk is that if you lose access to the digital wallet holding your private keys, the funds are lost forever.
Volatility is also a major issue, the coin used to pay for your goods or services can dip in value overnight and cause you to lose money
What Is Needed To Accept Crypto Payments
- A Cryptocurrency Wallet — it can be installed on your mobile device or computer, and you need it for storing your digital currencies and making blockchain-backed transactions. Several types of digital wallets are available, and while some only accept a single popular currency like Bitcoin, others support multiple digital currencies.
- A Crypto Payment Gateway Provider — they provide platforms that help users buy and sell cryptocurrencies, and they also provide tools that businesses can use to accept crypto payments on their websites. Coinbase and Bitpay are two of the most popular merchant service companies in the crypto industry.
How To Accept Crypto Payments: Step-By-Step Instructions
If you believe that your customers want crypto payments as an option, here are the steps you need to take to start accepting digital currencies on your website:
- Create a cryptocurrency wallet
- Enable crypto payments on your website
- Track your cryptocurrency payments
- Convert your digital currencies to dollars
- Resolve relevant tax liabilities
Step 1: Create A Cryptocurrency Wallet
Your crypto assets are not actually stored in your digital wallet, it only serves as the repository for the private keys (secret code) you need for transactions.
Since cryptocurrencies are virtual assets, what actually happens when money is sent to your wallet is that a record of your ownership is made on the blockchain network.
The network records all crypto transactions on a virtual ledger that is almost impossible for hackers to alter because each entry is copied immediately and spread across a global network of computers.
Anytime, you want to conduct a transaction using your wallet, a verification message will be sent to all the holders of copies of your record, and if all the important information about your transaction is verified, it will be allowed to go ahead.
The most popular wallets are Crypto.com’s DeFi wallet, Bitpay wallet, and Coinbase wallet.
Setting up the app shouldn’t take you more than a few minutes and you will be ready to start transacting using different types of cryptocurrencies like Bitcoin, Ethereum, Binance coin, Tron, Tether, and others.
Step 2: Enable Crypto Payments On Your Website
Now that you know how blockchain-backed transactions work, and you have obtained your wallet, you need to enable bitcoin payments at checkout on your eCommerce website.
You can do this manually with your wallet or with a payment gateway.
You won’t incur any fees for using your wallet for transactions, but your money can only be stored as a digital currency.
A payment gateway will let you choose between storing your funds as cryptocurrency or converting it to dollars immediately.
The issue is that fees will be charged for each transaction, though you will still enjoy lower processing fees compared to what’s charged by traditional banks.
If you are opting for the manual option, you just need to display your QR code on your website so that customers can send payments to your wallet address.
You also have to track and manually record each individual transaction to know which customer is paying and what they are paying for.
The process is a lot easier with a bitcoin payment processor.
The company will give you access to a plug-in that you can integrate with your eCommerce platform.
Some companies also offer crypto-compatible QR scanners that will work with your physical POS system and let you accept in-person crypto payments from customers at your brick-and-mortar store.
Once you are done setting up everything, let your customers know.
Explain why you are now accepting crypto payments and how it benefits them.
Considering the fact that your crypto payment processor will be the guardian of your funds, here are a few factors to consider when evaluating your options:
- Transaction charges: the fees are typically low, and it is usually around 1%, but you want to make sure you are getting the best possible rate.
- Supported Countries: the reason why many businesses are now accepting crypto payments is because of their international customers that prefer digital currencies as a payment method. If you have an international customer base, make sure your payment processor supports the countries where your customers are located.
- Payout Frequency: some payout in 24 hours, while it can take between three to five days for some providers. Go for a company that pays out daily if you want your funds to always come in as soon as possible.
- Cyber Security: there is always the threat that your wallet and even the platform of your payment processor can get hacked. To mitigate this threat, the best providers keep only a fraction of your funds as digital currency online, while the rest is converted to fiat currency that is backed and insured by the government.
- Customer Support: you want to sign up with a provider that offers 24/7 chat and phone support. You never know when you will need help.
Step 3: Track Your Cryptocurrency Payments
In the same way, you use your accounting software to track cash and credit payments, you must also track bitcoin payments for record-keeping purposes.
Those records will come in handy when it’s time to file taxes and also for analyzing the performance of your business.
Freshbooks and Quickbooks let you import your bitcoin transaction data.
With Freshbooks, you can integrate its API with Coinbase’s API using Pipedream.
For Quickbooks, you can use the Bitcoin Sync by Blockpath app to sync your bitcoin transaction data with Quickbooks online.
If your accounting software doesn’t support cryptocurrencies, you will have to work with your accountant to create the records manually.
Step 4: Convert Your Cryptocurrency To Dollars
Given how volatile cryptocurrencies can be, it’s best to transfer your funds to U.S. dollars as quickly as you can.
Your payment processor may offer the option to instantly convert coins to their dollar value, and if not, you may use a cryptocurrency exchange like Binance.
Also, if you are accepting crypto payments via PayPal, the company will automatically convert your funds from the relevant digital currency to the legal tender in your country.
Step 5: Resolve Relevant Tax Liabilities
The IRS sees crypto assets as property, while the SEC (securities exchange commission) treats some cryptocurrencies as securities.
By law, businesses must pay taxes on any capital gains made on property (in this case, virtual currency) when it’s sold.
For example, if your customer pays for a product in your store with 0.025 eth at a time when the exchange rate was $1,700, and by the time you converted it to dollars, the value had risen to $2400.
You must pay tax on the $700 difference.
The rules for taxing crypto assets vary from state to state, and you will have to speak to an accountant to learn more about the relevant regulations in your state.
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- How to Make Money Online Without Paying Anything: this article will show you several ways you can start earning money online without any upfront capital.
Wrapping Up
Opting to accept crypto payments on your website can expose you to a larger customer base and you will also be paying much lower fees on each transaction.
The downsides are the risks involved and the regulatory uncertainty.
This guide will help you get started, but you must stay alert to any changes in the regulatory space.
