Whether you are a crypto king or still learning the ropes, you may have considered accepting Bitcoin as payment for your e-commerce store at one point or another. With all the buzz around cryptocurrency, blockchain, and NFTs, all e-commerce store owners should at least familiarize themselves with how cryptocurrency can be used for online purchases.
Despite the recent volatility in cryptocurrency prices, large e-commerce platforms like BigCommerce, WooCommerce, and even Shopify already support cryptocurrency payments using crypto wallets like Coinbase, BitPay, GoCoin and CoinPayments.
In this blog, we’ll briefly discuss what cryptocurrency is and the companies that accept it, dive into the advantages and disadvantages of accepting cryptocurrency, and finally, explain how to safely accept cryptocurrency on your e-commerce store.
What is cryptocurrency?
Cryptocurrency is a digital form of currency (i.e., lines of computer code) not issued by a bank or government, which allows users to spend money anonymously. The most popular currency to date is Bitcoin, and these virtual coins can be bought, sold and stored on exchanges like Coindesk, and also used to purchase online goods wherever accepted.
To make purchases, Bitcoins must be stored in a digital wallet, either on a hard drive using secure software or online exchanges (e.g., Coinbase), and you ‘make a purchase’ by transferring Bitcoin from your virtual wallet to the vendor’s.
Top 4 cryptocurrencies to know
According to the major cryptocurrency exchanges, these are the four largest coins to know:
- Bitcoin — the original cryptocurrency
- Ethereum — more energy efficient than Bitcoin
- XRP (Ripple) — lower transaction costs and used for international transfer
- Bitcoin Cash — not bound to Bitcoin’s limited supply, so easier for widespread adoption
Stores that accept Bitcoin and cryptocurrency
Today, Bitcoin and other cryptocurrencies are accepted at these locations:
- Overstock.com — overstock apparel and items
- eGifter — premium branded gift cards
Is cryptocurrency a viable option for e-commerce stores?
As we’ve seen above, large e-commerce platforms and retailers accept cryptocurrencies for purchases, but should they? And should you? Let’s weigh the pros and cons, and talk about taxes.
Benefits of cryptocurrency in e-commerce
Lower transactions fees
Credit card companies and payments apps like Stripe or Square charge transaction fees anywhere from 3-5% on each transaction. Many e-commerce companies build these fees into their online store prices. Cryptocurrency transactions often don’t have fees or as low as 1%. However, there are cryptocurrency conversion fees when transferring cryptocurrencies to national fiat currencies like USD.
For anonymous transactions and for the bank-averse
Cryptocurrency allows for anonymous purchases by using encrypted wallet addresses — it’s basically like using unmarked cash. This gives your customers the ability to purchase items without compromising their personal information, and allows you to do business without worrying about any privacy regulations.
Reduce fraud and chargebacks
Contrary to popular belief, the blockchain technology that powers cryptocurrency was built specifically to reduce fraudulent activity. By accepting cryptocurrency, money is exchanged immediately, it cannot be rescinded and it cannot be forged; therefore, the ability for fraudulent chargebacks or returns is drastically reduced.
Disadvantages of Cryptocurrency in E-commerce
While the value of national currencies (e.g., U.S. dollar) fluctuates only slightly, cryptocurrencies are extremely volatile. We’ve recently seen massive upward swings, but a significant drop could pose a large risk for e-commerce retailers who need the cash flow for inventory replenishment and other day-to-day operations.
No Buyer Protection
When it comes to fraudulent chargebacks and purchases, consumers have enjoyed protection from credit card companies in the case of unauthorized expenditures. Crypto payments have no protections or recourse; like a wire transfer, when it’s gone, it’s gone. Therefore, consumers may require more trust in the retailer or brand before using cryptocurrency as a payment.
Bitcoin mining (essentially what powers the cryptocurrency system) consumes more electricity per year than the country of Argentina and has a carbon footprint as large as the country of New Zealand. Recently, Elon Musk caused the price of Bitcoin to plummet after announcing that Tesla will no longer accept Bitcoin due to environmental concerns.
Although Bitcoin isn’t subject to regulations, the government requires you to report your Bitcoin transactions and the revenue/loss from holding the “property” – as declared by the IRS.
According to the IRS, “a taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.”
How to Accept Bitcoin On Your Site
To get started accepting Bitcoin on your ecommerce site, simply integrate a BTC payment processor to your store. Most ecommerce platforms (i.e., Shopify, Magento, WooCommerce, BigCommerce) have existing integrations, so be sure to search their app stores.
Be sure to evaluate different BTC payment gateway solutions. Consider the following:
- Transaction fees,
- Payout frequency,
- Supported currencies,
- Supported countries,
- And customer support
Once you accept BTC as payment, be sure to market your progressiveness and tech-savviness to your consumer base. You can display signs on your site that say “Bitcoin accepted here”.
Unable to integrate directly to your store?
If a direct integration isn’t possible, consider alternative options such as the following:
- Payment buttons – Add a payment button to your website; consider using the Coinbase API to create your Bitcoin buttons.
- Custom integration – Build an API Bitcoin solution that directly integrates with your shopping cart
- Invoices – Invoice your customers, instead of shopping carts. Coinbase even has an invoice generator tool..
Wrap It Up
If you decide to accept Bitcoin and cryptocurrency on your online store, you’ll want to make sure that your system, transaction, and funds are all as secure as possible. So be sure to use strong passwords and multi-factor authentication (MFA) for your crypto exchanges and wallets. Also, be sure to regularly update, backup and encrypt your systems and crypto wallet.
If these funds are vital to your business, consider cold storage i.e., keeping an offline Bitcoin wallet like a flash drive, and don’t keep large amounts in your wallet for long periods of time.
While new technologies can be confusing and a bit scary, cryptocurrency has the opportunity to transform e-commerce and international trade as we know it. So while you may not be comfortable at this, at least you’ll have a deeper understanding as the internet and e-commerce landscape continues to evolve.