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Can You Accept Cryptocurrency As Payment?

Posted by Ryan M. Newburn | Dec 20, 2022 | 0 Comments

Cryptocurrency has continued to emerge as a novel form of conducting transactions. According to data from the Pew Research Center, 16% of adults have personally invested, traded, or used cryptocurrency. Consequently, as its popularity has grown worldwide, businesses may now opt to take advantage of the crypto exchange to accept payment. However, like any new business practice, there are important practical and legal considerations you should understand before implementation.

This article will explain the advantages and disadvantages, and any other considerations, of accepting cryptocurrency as payment for your business. If you have any questions about whether your business can or should accept cryptocurrency payments, contact our experienced business lawyers today.

What is Cryptocurrency?

Cryptocurrency is decentralized money designed to be used and exchanged digitally. The first currency, Bitcoin, launched in 2008 and remains one of the largest and best-known currencies. Yet competitors such as Ethereum and Litecoin continue to grow in popularity through daily trading.

Cryptocurrency operates through blockchain technology, which facilitates the transfer of information and records transactions like a virtual ledger or balance sheet. Blockchain provides user protection by vetting and verifying payments that occur throughout the network.

Why has cryptocurrency become more popular in recent years?

The popularity of cryptocurrency comes from its novel technology and freedom from regulation. Using crypto makes it possible to transfer assets online without using a bank or a payment processor. No country, company, or third-party controls any given cryptocurrency. Therefore, participation is welcome to anyone.

Moreover, there is very limited government regulation of cryptocurrency. However, the Securities and Exchange Commission (SEC) has begun to set its sights on preventing fraudulent practices on any new currency that may qualify as a security. Many people use exchanges such as Coinbase, Kraken, and to trade cryptocurrency.

Accepting Cryptocurrency as Payment

Like any other means of exchange (e.g., cash or credit), businesses can accept cryptocurrency as a form of payment for their goods or services. According to a recent estimate, over 2,300 companies accept Bitcoin payments in the United States. Additionally, a study by the HSB  showed that 36% of small and mid-sized businesses accepted cryptocurrency. However, any small business considering this new practice should understand how it works and the risks.


  1. Low Processing Fees

One of the biggest advantages of using cryptocurrency as a form of payment is the low processing fees. Credit card companies often impose card processing fees that vary from 3%-4% per payment. Over time these fees incur a great expense for business owners and incentivize using other payment methods. Generally, Bitcoin transactions don't require processing fees, but using merchant exchanges may cost a small fee.

For example, Coinbase and BitPay charge a 1% transaction fee, and well-known platforms such as PayPal have adapted their business model to make easy crypto conversions. The reduction in fees from 4% to 1% can leave significantly more money in business owners' pockets than large banks and credit card companies.

  1. Opportunity for New Customers

The use of cryptocurrency as a payment method may attract more customers who prefer Bitcoin as a payment method. For instance, international customers may more easily access the products and services of small businesses by paying with cryptocurrency.

BitPay recently conducted a study to measure the Total Economic Impact of businesses accepting cryptocurrency, which showed that up to 40% of customers who pay using crypto are new to the merchant. Therefore, there is some quantifiable basis to suggest businesses may gain customers by implementing this new medium.

  1. No Risk of Chargebacks

One of the disadvantages of customers paying with credit cards is the risk of chargebacks; a charge returned to a payment card after a customer disputes a payment through their account. Typically, a chargeback can cost a merchant around $25 per instance. Like cash, cryptocurrency transactions are final, and no third party can dispute or reverse the charges.


  1. Technical Barriers

The first setback of accepting cryptocurrency is that the business will need to set up a digital wallet, which may be offered on one of the popular exchange platforms. Many small business owners, especially those less technologically savvy, may need help understanding how to utilize digital platforms.

Moreover, while credit card companies offer extensive merchant support to help answer questions and respond to problems, cryptocurrency exchanges need more preparation to answer merchant questions. If you accept cryptocurrency payment without the help of an exchange platform, the merchant will have to manage problems on their own.

  1. Volatility

Another issue with cryptocurrencies is that they have demonstrated extreme volatility. For example, though Bitcoin started at a few cents, in slightly over a decade, it grew to be valued at around $65,000 and then rapidly fell to approximately $30,000. For some risk takers, this may seem like an opportunity for growth, but for the secure and small businessperson, there may be more safety in other assets.

Fortunately, using platforms like Coinbase or PayPal, a business can easily transfer cryptocurrency assets into U.S. dollars and avoid the potential for volatile costs. Furthermore, a merchant concerned about volatility can only accept payments from coins that have a reputation for being less volatile.

  1. Security

In 2021, 46% of cryptocurrency security breaches impacted small and midsized businesses. While a business accepting crypto payments may be safe from credit card scams, it will face a new cybersecurity threat. At the moment, cryptocurrency appears to be secure from most cybercriminals, but there have been many efforts to further protect users. For example, Coinbase holds very little of its currency online, and the company will insure losses in the event of a breach.

Moreover, fiat currency held on Coinbase is FDIC insured up to $250,000. Unfortunately, none of these protections apply to a personal digital wallet. In that case, it is the user's responsibility to protect their assets by using a strong password and choosing wallets with a strong reputation for customer security.

  1. Regulatory Uncertainty

Finally, government scrutiny and oversight change the regulatory landscape as cryptocurrency grows. It is still being determined how the government may proceed in regulating cryptocurrency. Still, it will be important for business owners who accept digital payments to stay aware of the regulatory changes as they're made.

The U.S. Securities and Exchange Commission, and Chair Gary Gensler, have already begun to crack down on some currencies that the SEC has deemed to qualify as securities. This has led to various preliminary lawsuits, whose impacts may determine the future of cryptocurrency regulation.

How is Cryptocurrency Taxed?

According to the IRS, virtual currency is treated as property for Federal Income Tax Purposes. Therefore, principles applicable to property transactions are also applicable to transactions with digital currency. Businesses must report their capital gains or losses when operating with virtual currency.

Different states also have their own rules on taxing cryptocurrency. Some provide no guidance, while others tax crypto like cash, and others have opted to implement no tax at all. No matter what, keep records of your crypto transactions, including what you paid for crypto and how much you sold it for, and have receipts for each transaction.

How to Set Up Cryptocurrency Payment?

If you want to accept cryptocurrency for your small business, you should follow these steps:

  1. Set up a cryptocurrency wallet or exchange. A cryptocurrency wallet is where you can store your digital assets and make transactions. An exchange like Coinbase provides a platform for completing transactions and converting crypto into U.S. dollars. Crypto exchanges are generally the easiest options, but they incur transaction fees of around 1%, while accepting payments through your personal wallet is free.
  2. Enable Bitcoin payments at checkout. If you use an online store for your small business, you will need to enable Bitcoin payments at your online store. You may download a plug-in or app or integrate payments using code from your wallet to do this. Exchange platforms can also help with this, providing code for integrating payment services.
  3. Account for your payments. Just like any cash or credit payments you accept for your business, you will want to account for all your cryptocurrency payments. If you use accounting software, you can integrate your Bitcoin transactions into the software, so it manages it for you. Good bookkeeping is important for any business and helpful when it comes time to file taxes.
  4. Finally, be prepared to convert your crypto to cash. Since cryptocurrencies like Bitcoin have been historically volatile, you can protect your assets by quickly transferring them to U.S. dollars. Depending on their relatively low transaction fees, you may do this with an exchange of your choice.


Businesses nationwide have begun accepting cryptocurrency as a payment method for transactions. This has allowed for low processing fees, new customers, and protection from chargebacks.

However, new businesses considering this payment option should also consider the technical barriers, volatility, security, and regulatory uncertainty. This article should provide any merchant's basic questions about accepting cryptocurrency payments. However, as the regulatory space changes around cryptocurrencies, it is important to stay up-to-date with any changes.

If you have any questions, contact our legal team today for a free consultation.

About the Author

Ryan M. Newburn

Ryan Newburn is a business and legal expert trusted by Executive Teams and Boards of Directors to apply sound business principals to solve legal and financial problems. Ryan's practice focuses on mergers and acquisitions, financings, corporate formations and corporate governance in a broad range of industries including energy, distribution services, healthcare, medical devices, and technology. Leveraging his formal business training and years of practical experience, including as an executive at public and private companies, Ryan has advised hundreds of companies in dozens of industries of unique legal and financial issues.


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