Insight for small businesses on the Case for & Against accepting cryptocurrency payment


Cryptocurrencies became a sensation in the economics and financial spheres last year after Bitcoin soared to almost $20,000.

The rapid rise in the value of Bitcoin also saw the arrival of hundreds of new tokens and altcoins. Of course, Bitcoin has since given back much of those gains as it currently trades around $6500, and most of the altcoins in the market have also suffered steeper declines. Nonetheless, cryptocurrencies are still a regular fixture in news headlines and there are about 1833 tokens in the market now.

As the interest in cryptocurrencies as an investment continue to rise; there’s a growing push to return to the transactional use of cryptocurrency as a means of payment as highlighted in Satashi Nakamato’s original whitepaper on Bitcoin. However, before you make the decision to start accepting cryptocurrency payments; here are important things you’ll need to consider to make an informed decision.

Here’s why you should accept cryptocurrencies

Cryptocurrencies are fundamentally a decentralized peer-to-peer means of transferring money without the instrumentality of a traditional financial institution. The best part is that cryptocurrencies are not under the control/regulation of central banks or governments; hence, they are not subject to the effects of irresponsible fiscal policy.

One of the key benefits of accepting cryptocurrency payments is that they offer an unparallel level of merchant protection by guarding against fraudulent chargebacks. Retailers lost as much as $7 billion to chargebacks in 2016 and the number could potentially soar to $31 billion by 2020based on a study by Nelson Reports. Cryptocurrency payments are however immutable, and they can’t be canceled; hence, payments made with cryptocurrency to merchants are final.

Secondly, cryptocurrency payments are peer-to-peer without an intermediary – buyers send funds directly from their wallet to the merchant’s wallet. The fact that there are no intermediaries means that there are lower transaction costs in cryptocurrency payments. Credit card payment processors usually charge a flat fee plus up to 4% of the total transaction fees. Fees in cryptocurrency payments are usually fractions of a basis point and some cryptocurrency protocols are experimenting with zero fees.

Thirdly, accepting cryptocurrency payments could open the door of opportunities for you to sell your products/services to buyers in foreign markets. Cryptocurrency payments are borderless; hence, you don’t have to worry about whether your bank has a corresponding bank through which it will route your payments. Going forward, cryptocurrencies could also power microtransactions so that you can sell to buyers that had previously been unserved or underserved by traditional financial institutions.

Here’s why many businesses are not yet accepting cryptocurrency payments

One of the biggest reasons many small businesses are wary of accepting cryptocurrency payments are the depressing stories about how cryptocurrency exchanges fall victim of hacks in which the user funds are stolen. Exchanges provide a place for people to buy and sell cryptocurrencies; but the fact that they often hold huge user funds often makes them target for hackers. A decentralized exchange might eliminate the centralization risk facing exchanges. In fact, some of the best decentralized exchangesoffer unhackable blockchains and they use smart contracts to facilitate trades between their users.

The second factor delaying the transactional use of cryptocurrency is the incredible level of volatility that cryptocurrencies suffer. The price of a cryptocurrency could rise/fall as much as 5% to 10% in a single session – and industry stakeholders won’t bat an eyelid. However, many business owners will be incredibly worried if the value of their money in the bank suddenly declines by as much as 10% overnight.

Thirdly, setting up a process for accepting cryptocurrency payment still requires a great deal of technical expertise beyond the ability of many business owners. Starting with setting up a wallet, understanding smart contracts, hedging volatility, and navigating unclear regulatory waters. Many small business owners do not have the expertise to overcome the aforementioned technical barriers and the fact that not many people want to pay with crypto makes it impractical to pay someone to setup the payment system.