Ever since Bitcoin arrived on the scene in 2009, the popular cryptocurrency has been shrouded in mystery and controversy along with a lot of investor hype. Few businesses gave Bitcoin much attention initially. Many viewed the currency as an extension of the black market or “dark web” which hampered its acceptance outside the tech community. Many consumers thought it was just a way to pay for drugs or guns online.
The historical price of Bitcoin has garnered the most attention while attracting speculators in search of a quick buck. The price of one Bitcoin fluctuated between $250 and $1000 the end of 2013 and the beginning of 2017. What happened during 2017 caught everyone’s attention: the price soared to $3000 in June then went up to $5000 in September. By the end of November, the price had hit $8000. In December, Bitcoin reached $17,900, an all-time high, before settling in around $10,000 today.
Bitcoin has finally moved into the mainstream, and many reputable businesses now accept the currency for products and services. These include companies such as Dish Network and Microsoft. These developments have many business owners wondering if they too should accept Bitcoin.
In this article, we will look at and benefits and risks associated with Bitcoin and all digital currencies. This article assumes a basic understanding of Bitcoin. Fidelity provides an excellent primer for those new to the technology.
- Merchant Protection – Chargebacks are the bane of accepting online payments because they cause loss of revenue and take up a lot of administrative time. Accepting Bitcoin is much like accepting cash: payment is immediate, final, and cannot be reversed by a third-party credit card processor. Payments can only be refunded by the person who received the payment.
- Low Fees – Fees are much lower with Bitcoin than standard credit card processing. This may change over time. But today, you determine the transaction fees based on how quickly you want to receive your money. Pay no fees and it takes longer to get paid, but the choice is yours.
- Competitive Advantage – Early adoption can give your business an advantage, especially if your competitors are still on the fence about Bitcoin. It may also open your business up to customers who might be searching for merchants to accept Bitcoin. This is the case with those who have suffered by credit card or identity theft.
- International Transactions – Bitcoin allows you to send or receive money from anyone, anywhere in the world. You do not have to worry about exchange rates, bank holidays, or other hassles when sending money across borders.
- Privacy – Bitcoin allows you to pay or receive payment without having to share any personally identifiable information that criminals can intercept. This should increase privacy while reducing fraud.
While there are clear advantages to accepting Bitcoin, there are several risks all businesses should consider before making the jump.
- Major Volatility – One cannot overstate how volatile the Bitcoin marketplace has been over the past year. The wild price swings make accepting Bitcoin a risky proposition. You might accept $5000 in Bitcoin that could lose half its value in a day or two. Converting Bitcoin into your local currency can help get around this, but it makes pricing your products and services a challenge.
- Poor Reputation – Bitcoin has gained broader acceptance, but many people still see it as the preferred method to pay for illegal activities and products. Some businesses avoid Bitcoin believing it will stain their reputation. This is generally not the case with tech companies, but it is something to consider.
- Security Flaws – Criminals have hacked into digital wallets and made off with millions of Bitcoins in a few highly publicized cases. This is made worse by the fact that Bitcoin and other cryptocurrencies are not backed or insured by the FDIC. A few companies such as Coinbase are changing that by providing insurance to accounts they manage, but it’s hit or miss in the broader market.
- Regulatory Confusion – Lawmakers are still wrestling with how to regulate and govern Bitcoin. The uncertainty spooks speculators feeding into an already nervous market. What does this mean for your business? You may not have any guidance on how to report gains or pay taxes on the Bitcoin you receive. That alone will scare businesses away from Bitcoin until the rules and regulations are settled.
Some people will say that you need to be tech savvy to accept Bitcoin and they are partially correct. It helps to have someone on staff that understands blockchain and exchanges. But there are plenty of consultants who can help you get started as well as educate you along the way. The fact is, the cryptocurrency ecosystem is undergoing major changes so what is true today, may not be true a month from now.
Talk to most merchants who accept Bitcoin and they will tell you they like the low fees. They will also tell you that doing business in Bitcoin requires ongoing education and the ability to adapt to a volatile market.
Consider how well your business deals with change. You may decide that waiting for the market to mature is the best choice. But many big and small businesses have expanded their market with the help of Bitcoin. Weigh the benefits, risk, and then ask yourself if it is time to accept Bitcoin. Good luck!