Accepting Bitcoin payments involves risks and costs for businesses. Bitcoin transactions are irreversible, requiring trust between customers and merchants. Businesses must also pay capital gains taxes on Bitcoin received based on its fair market value. While Bitcoin avoids international transaction fees, its volatility and lack of mainstream adoption may limit its usefulness as a payment method for small businesses. Regulatory issues and the currency's misuse must also be considered before setting up crypto payments.

1. What You Need to Know
Before Accepting Bitcoin
Payments
A growing number of small businesses
are accepting cryptocurrency. But
there's a lot to understand if you want
to try it with your company.
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Digital currency may not be quite mainstream yet, but a growing number of
companies are now are accepting Bitcoin as payment. The question is, should

2. your small business do so too? The answer depends on your business goals, and
exactly what you plan on doing with your digital gains.
Let's start with a definition: Bitcoin is just one type of cryptocurrency, which is
decentralized, digital currency that can be used to buy goods and services but
can also lose or gain value, like stocks. Many companies have turned to crypto
during the pandemic to store their cash reserves, viewing currencies like Bitcoin
as a safe bet amid economic uncertainty. Bitcoin, and most other crypto, is
considered to be immune from inflation since there is a fixed supply of it and
the government can't manipulate its value. However, its value is tremendously
volatile, so relying on it comes with an element of risk.
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Bitcoin is still by far the most common cryptocurrency accepted by businesses
as payment, though Ether, the second-largest cryptocurrency, is gaining
ground. For companies with customers from around the world, adopting
Bitcoin has become a way to avoid banks' transaction fees and long processing
times, as well as the added task of converting to a different currency.
To get started, you will first need a bitcoin wallet, which allows you to buy,
store, and sell the cryptocurrency. Bitcoin wallets come with private keys, or a
secret number that allows the holder to access their crypto. You can also get
a "hardware wallet," which requires you to either write down your keys or keep
them on a hard drive to avoid storing them online. Companies can also sign up
with a crypto exchange such as Coinbase or Lumi Wallet, which store keys on a

3. third-party server. Bitcoin.org has a helpful tool that can help you select the
wallet that is best for your business.
If you're an online merchant who wants to accept payment in Bitcoin, platforms
like Etsy and Shopify have partnered with payment processors like Coinbase
Commerce and Bitpay, which allow e-commerce stores to accept Bitcoin.
Business owners can also sign up on Coinbase Commerce and other payment
processors directly. Such payment processors are free to set up and allow
merchants to directly accept crypto payments from customers anywhere in the
world.
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But small-business owners should keep a number of things in mind before
accepting crypto. Ali Hamam, vice president of Ontario-based restaurant
chain Tahini's Mediterranean Cuisine, converted all of his business's cash
reserves into Bitcoin as an inflation hedge last year, but he's less enthusiastic
about the currency as a payment method.
"For us, there are a lot of cons with accepting Bitcoin payments right now," he
says. The many expenses restaurants have, including employee salaries, supplier
fees, and rent, all need to be paid in traditional, non-digital money. And at least
for now, he says, there's the issue of public awareness: "Ninety-five percent of
our customers haven't even heard of Bitcoin."

4. Bitcoin transactions are also irreversible, which means both the customer and
merchant must have a great deal of trust in each other. Transactions can be
refunded only by the party receiving the funds. Businesses that accept Bitcoin
should be prepared for the possibility of customers requesting refunds, and keep
track of how much money each customer has paid.
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Another major issue around accepting Bitcoin is the tax implications. Back in
2014, the IRS made a key decision on virtual currency to essentially
treat Bitcoin as property for tax purposes. Businesses that choose to accept
Bitcoin or any other cryptocurrency must report it as gross income based on
its fair market value when it was received. In other words, each time you sell,
buy, or use Bitcoin, you're subject to a capital gains tax.
As Accounting Today points out, any business selling its Bitcoin needs to keep
track of its value the day it was received and the day it was sold, and also factor
in other variables that can adjust the total amount owed. For small businesses
dealing with several transactions a day, that can get very complicated. A general
rule is that small businesses should accept crypto only for big-ticket, luxury
purchases rather than smaller, more frequent ones.
And of course, since every transaction is anonymous, crypto is the currency of
choice for many bad actors, including drug lords and black hat hackers. In

5. some countries, including India and China, Bitcoin is illegal. In the U.S.,
treasury secretary Janet Yellen called the misuse of cryptocurrency a "growing
problem" and signaled a need for further regulation. If you're set up to accept it
as payment, you'll need to stay current on the rules.
Finally, Bitcoin's staggering volatility dissuades many people who hold it from
touching it. If you purchased $100 worth of Bitcoin in 2014, it would be worth
more than $12,000 today. This is why consumers tend to steer clear of spending
their Bitcoin on small purchases--and why you may have trouble finding
enough customers to warrant setting up crypto payments to begin with. And if
you do decide to go for it, remember that the volatility is a double-edged
sword: Unless you cash Bitcoin payments immediately, there's always the
chance of the currency's value taking a dive and damaging your bottom line.
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Credit: https://www.inc.com/amrita-khalid/cryptocurrency-bitcoin-payments.html