The era of digital currency is here. We are currently witnessing a great shift in the way money operates. With bitcoin’s entrance into the economy, a clear distinction has been formed between traditional paper currency and the new and fresh digital currency.
It's not just investors or individuals who are driving this adoption, businesses too are accepting it as a form of payment. As a matter of fact, merchants who accept crypto payments are increasing in number.
It is worth pointing out that for any business deciding on the right payment method can be a daunting task as it needs to resonate with its customers.
And given bitcoin's infancy, it can be hit-and-miss with some people, but, the good news is that businesses do not need to replace their existing fiat payment options to start accepting bitcoin.
If you are a business pondering over whether to accept bitcoin payments for your business alongside fiat, here are some pros and cons to help you make a sound choice.
AdvantagesThe more the merrier…
Who doesn't like more sales?
Bitcoin’s userbase is growing at an exponential rate and it is not expected to slow down any soon especially as bitcoin goes more mainstream.
In 2021, about 3.9% of the population has some ownership of digital currency. That amounts to around 1 in every 25 people, with over 300 million individual investors total. — Source
By accepting bitcoin along with your fiat, you are opening up to a whole new and much wider userbase which can essentially increase your company’s overall sales.
What's even more exciting is that you get to tap into a global market. As bitcoin is borderless it doesn't matter where your customer is located. They can buy your products just as easily as everyone else and without having to worry about payment decline and high fees, something commonly seen with fiat card payments for cross-border transactions.Get your Hedge…
The global economy is seeing unprecedented changes that can have long-term ramifications on the value of the currency of most major countries.
Added to this is the ongoing pandemic which seems to act as a catalyst for the looming recession that many economists predict will come if things continue the same way.Source: Investopedia
Inflation rate is reaching new all-time highs for numerous countries around the world taking away buying power from its citizens. Countries like Argentina, and Turkey are seeing inflation rates of 52.1% and 21.31% with the Eurozone seeing all-time high rates of 4.9%.
Even rich countries like the USA, UK, and Australia are seeing rates like 6.2%, 4.2%, 3% respectively which will make anyone wonder if stacking any fiat is even worth it.
In such times, accepting cryptocurrency such as bitcoin can act as a much-needed hedge to safeguard your business, not to mention you get to diversify your business's asset portfolio.The price is high…
Bitcoin has been one of the best-performing assets in 2021 even beating out the good ol’ gold, the standard for currencies all over the world and the symbol of wealth.
Bitcoin has given a return on investment of a whopping 227,000% since its inception, of course, a lot of it is attributed to the fact that bitcoin was traded for pennies when launched in 2009.
But, even looking at its ROI for the past 3 years, the numbers do not stop astonishing, it was traded for around $3.5K 3 years ago and is now worth $55K, giving us an ROI of almost 1500%.
US dollar on the other hand has inflated by 8.2% in the last 3 years, which means your $1000 dollars in 2019 are now worth $991.8.
So holding at least some of your assets in bitcoin can prove to be a sound investment.Coz the future is decentralized…
Bitcoin was designed to give power back to the people and take it away from the corrupt centralized institutions that profit from the suffering of the common people.
Bitcoin is not controlled by any organization, person, government, or entity thus it cannot be manipulated.
With a fixed supply of 21 million bitcoin, its value is decided by the supply/demand principle where its value is said to increase as its supply decreases over time. This principle cannot be changed or tampered with by anyone and this makes bitcoin resilient to inflation, contrary to the US dollar.
Let's take Venezuela for example which is witnessing an economic crisis with an inflation rate of an eye-watering 1575%. Bitcoin can not only empower but rescue its people who are otherwise left at the hand of their government.Source: REUTERS/Carlos Eduardo Ramirez
DisadvantagesNot everyone's cup of tea…
Let’s not get carried away, bitcoin is a relatively new concept. It is strange to imagine it did not even exist in the early 2000s and is now one of the best-performing assets of all time.
With such a bold and groundbreaking ideal bitcoin is sure to attract some skeptics and non-believers who do not believe in its value or what it stands for.
Moreover, bitcoin has also been the recipient of some bad press in the past with many people calling it a currency used by criminals for their nefarious activities. This is in lieu of bitcoin’s private and anonymous nature that allows anyone to transact with each other without the need of a centralized authority overlooking the transaction.
Due to this, there might be a possibility that some of your customers might get a little suspicious or upset over your acceptance of bitcoin.Too many currencies to work with…
Running a business is hard as it is when you have just one currency to deal with let alone two or more. Adding multiple currencies can make it difficult to manage the overall finances of your business.
Usually, for a business that operates in different countries and accepts various currencies, the bookkeeping usually happens in one central currency, this is most commonly the native currency where the business is located and in some cases, the US dollar.
When we add bitcoin to the equation, things get a little complicated. Due to bitcoin volatility, its price equivalency to any fiat currency keeps fluctuating making it difficult to crunch any business’s balance sheet numbers.
A workaround to this is;
- Using stablecoin which keeps its value stable to 1USD
- Or, converting the received bitcoin into a fiat currency ASAP
Both these options protect your business from the unnecessary hassle of price volatility but you will miss the many benefits that bitcoin has to offer.What's up with those taxes?
Cryptocurrency is in a legal grey area. There are currently very few countries that have proper laws regarding cryptocurrency let alone laws involving businesses.
This makes it difficult for businesses to first accept bitcoin and second report their earnings from it and pay the appropriate tax.
This has been one of the major reasons that have put off a lot of businesses to accept bitcoin on their website. With no proper regulations, people are skeptical of using a currency that does not fall under the jurisdiction of their country’s law. It might even cause harm to their business if their government decides to rule against it.
Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and China have all banned cryptocurrency - Source
Any entrepreneur will vouch for the fact that customers are the most important part of their business. Providing better customer satisfaction has always been a priority for most businesses.
And this cannot more true when it comes to payments. Essentially you are implementing a solution to provide a better experience to your customers. And with bitcoin, it's in the form of quick, cheap, borderless payments without the inference of a third party.
But, despite crypto’s growing popularity businesses need to tread carefully with it.
While it offers a much-needed and refreshing hedge against inflation and a high return, it is still in a legal grey area with a majority of governments something that businesses cannot factor out for a smooth operation of activities.
This is a companion discussion topic for the original entry at https://insights.blockonomics.co/the-good-and-the-bad-of-accepting-bitcoin-payments-with-fiat-73694d02a6d1/