Cryptocurrency has been in the news for a long time.
But what exactly is cryptocurrency?
Basically, it is a currency that has no physical existence and is only present in digital space. You can only transfer it from one computer to the other. It started with one or two cryptocurrencies initially, but now the scenario is completely different.
Surprisingly, according to the Crypto Market Sizing Report 2023, there are more than 580 million crypto users worldwide. So, what are you waiting for?
This is the best time for you to embrace this modern currency; no matter if you are a businessman or just an individual freelancer.
Accepting crypto payments enables you to have faster and more cost-effective transactions. Also, it opens up new business avenues and increases sales for you.
However, still, there are many businesses and individuals who are unaware of the tools and technologies of this payment system. So, here, we explain everything regarding cryptocurrency payments, legal considerations, tax implications, and also share some important tips.
Introduction to Cryptocurrency Payments
Transactions that are done through cryptocurrency are cryptocurrency payments. When crypto came into picture, the popular currencies were Bitcoin and Ethereum. However, to your surprise, today, more than 9000 cryptocurrencies are active in the market.
To initiate a cryptocurrency payment, you will need a gateway to facilitate transactions. First of all, the client initiates the payment by paying you the said amount based on the particular cryptocurrency’s fair market value. The cryptocurrency payment service then converts this payment into your desired currency. Once converted, the payment gateway provider adds this money to your bank account.
However, if you want to accept your money in the form of cryptocurrency, you can accept it in your personal wallet. Which approach suits you best depends on your business requirements. You can validate and ensure your transaction based on the information encoded in the crypto. A digital ledger, also known as blockchain, records all transactions.
So, all in all, you need not worry about managing digital currencies. Also, the process is quite convenient and transparent.
Benefits of Accepting Cryptocurrency
Are you still skeptical about accepting these digital tokens as your payment?
Don’t be; because, here, we share with you the key benefits of accepting cryptocurrency payments.
Faster transactions
Unlike traditional payment systems, cryptocurrency transactions are very fast as they do not involve intermediaries like banks, brokers, or clearinghouses. Due to its decentralized nature, a crypto transaction takes only 30 minutes to two hours. As the waiting period reduces, both businesses and customers become more efficient.
Lesser transaction fees
As there are no intermediaries in crypto transactions, you save on paying unnecessary processing fees charged by them. Due to the absence of third parties, the transaction fees in crypto payments are always lower than those in traditional payment systems.
Better security
The blockchain technology of cryptocurrency enhances the interiority of transactions with its intricate encryption. It’s impossible to alter or manipulate any crypto records. Also, as a crypto owner, you can keep your funds safely in digital wallets which are not accessible without the specific key. As a result, fraud incidents are lesser in crypto transactions, making them accountable and transparent.
No chargebacks
Generally, businesses have to bear chargebacks when they get into some kind of legal dispute. However, as there is no central authority in crypto transactions,
Crypto payment does not involve any central authority; it always happens directly between a business and its customer, and there are no chances of chargebacks.
Easier cross-border payments
If your business has a global clientele, you need to go through different exchange rates and bank fees. However, you can use cryptocurrency worldwide without any third-party involvement, making cryptocurrency payments easier and affordable to accept.
Setting up Cryptocurrency Payment Methods
Wondering, how to accept cryptocurrency as a business?
Here are some steps that make it clear how to accept crypto payments.
1. Understand the payment gateways or wallets of cryptocurrency
There are two ways in which you can accept a crypto payment: payment gateways or cryptocurrency wallets.
So, which crypto payment methods do you want to choose?
A crypto wallet is a digital wallet where you can hold cryptocurrencies for an indefinite time without converting them to fiat currencies. On the contrary, a crypto payment gateway is an intermediary in your transaction. With this gateway, you can accept the cryptocurrency and get fiat currency in return in your bank account. By far, this is the best way to accept crypto payments.
The cryptocurrency payment services allow you to process transactions more easily and quickly.
2. Choosing a payment platform
While choosing your payment platform, keep in mind security aspects, transaction fees and supported cryptocurrencies. Always make sure that you are picking a reliable and secure provider.
3. Create your account
Once you have selected your payment gateway, register yourself there. You may need to mention some business details for initial registration.
4. Select the crypto
As already said, there are almost 9000 cryptocurrencies in the market. However, not all have worldwide acceptance. So, it’s better to be careful while choosing your cryptocurrency keeping in mind market preferences and popularity. Also, you need to see whether the cryptocurrency aligns with your business needs and values.
Some of the popular cryptocurrencies include Bitcoin, Ethereum, Ripple, Binance, Tether and Solana.
5. Integrate the payment gateway
Now, your gateway provider will instruct you to integrate the gateway software with your checkout page. The integration also depends on which platform you are using the gateway (in-store, website or mobile app). The instruction steps are available in APIs or plugins.
6. Test the transaction
Before you go live, verify everything through a test transaction. Check if the payments are converted into fiat currencies and deposited in your accounts.
7. Create a payment policy
Lastly, make sure to create a comprehensive policy detailing clauses for returns, refunds and volatility in cryptocurrency.
Tips for Smooth Transactions
If you know the small tips and tricks of crypto transactions, accepting payments becomes a lot easier. Here are some tips that help you execute crypto transactions smoothly.
- Be a part of the reputed crypto community so that you can share your experiences and learn from them.
- Grab the opportunity of crypto presales. If you invest early, you get better returns.
- Joining a crypto signal group helps you know trade setups and recommendations from worldwide traders.
- It is always good to practice payments on a demo account to understand the nitty-gritty of trading.
- Global events and changing economic trends influence crypto markets. So, keep an eye out for them.
- Before starting crypto payments, make yourself comfortable with the technology to make informed decisions.
- Utilizing trading bots is also a good idea as they always process transactions based on pre-set rules, reducing the chances of human error.
- Make a clear trading strategy and stick to it as closely as possible.
Security Considerations in Crypto Payments
Crypto security is of paramount importance when it comes to accepting crypto payments. So, let’s discuss some key security considerations to ensure safe transactions.
- There is a private key that allows you to access funds. Make sure that you create a strong and difficult key and always keep that key offline. Never put it on the internet. If possible, diversify your wallet by maintaining multiple wallets to store funds.
- Research is essential when it comes to crypto payments. Choose a reputed crypto exchange based on its security measures, past record and transparency in practices.
- If you forget your password or lose seed phrases, you can lose your funds permanently. Keep your wallet devices and software safe and secure.
- Always verify the receiver's address before sending or receiving cryptocurrency. Mistakenly done transactions are irreversible.
- Try to keep a backup of your wallet data to avoid data loss.
- Beware of fraudulent websites.
- Keep yourself updated with the news and changing practices of the crypto world.
- Avoid entering your wallet through public Wi-Fi.
Legal and Tax Implications
You must know that while cryptos are not considered legal tender by the US government, crypto transactions are treated as valid. Although regulations considering crypto exchange also vary state by state, by and large transactions of cryptocurrency are considered legal.
The IRS considers crypto transactions to be an exchange of value. These exchanges are thus taxed as well. If you accept cryptocurrency as a payment in the course of your business, then it will attract taxes just like any other business income. You have to report such business income, earned in the form of cryptocurrency, to the IRS.
As per federal regulations, cryptocurrency is similar to property. If you have a cryptocurrency and you hold it for some period and its value gets appreciated, then you have to pay capital gain tax on increased value as well. The rate of tax will depend on the holding period and your overall taxable income.
Simply put, if you earn any further gain or profit from the cryptocurrency, it is taxable. You have to report your cryptocurrency transactions in Form 1040. If you don’t report them in time, you may be fined and sometimes slapped with criminal charges. In the near future, we can expect a comprehensive regulatory framework from the US government that considers cryptos.
In Conclusion
Accepting crypto payments opens doors for you to connect to a larger and more tech-savvy customer base. Follow this guide to set up your payment gateway and make your business ready to flourish in this digital economy. But remember, keep yourself updated with the changing rules and regulations for a complaint payment practice.
