The Pros & Cons of Accepting Bitcoin for Small Business Payments

Should you accept Bitcoin payments in your business? What are the benefits and what are the risks? Here are pros and cons of Bitcoin payments to consider.

Bitcoin recently celebrated its 12th anniversary. In 2020 the cryptocurrency’s price increased from around $7000 to just under $30,000 from January through December. At the time of this writing, it is valued at over $32,000. Whether you think Bitcoin is going to keep going up or is due for a correction, you should consider these pros and cons before accepting Bitcoin as a payment method in your small business. 

Pros of Bitcoin Payments for Small Businesses

There are some small businesses where it would not make sense to accept Bitcoin, however, the following benefits may be worth considering.

  • Cross-border payments are slow – Businesses that accept payments internationally have few options. Most of them are slow. Bank payments can take days. Checks are inefficient. And most online payment systems such as PayPal are not accepted in every country. Bitcoin, however, is a peer-to-peer payment system that allows one party to send payment to another with no third-party facilitator. Payments are made within minutes. All you need is a cryptocurrency wallet.
  • No chargebacks – Small business merchants are always in danger of credit card chargebacks. That is not the case with Bitcoin. Since it is peer-to-peer, no third party can return the payment to the customer. That decision is the merchant’s alone.
  • Lower transaction fees – Other payment methods have huge transaction fees. PayPal’s fees can be over 4% ( and Many payment processors have setup fees and include a flat fee per transaction in addition to a percentage of the transaction. Small business merchants can find Bitcoin exchanges with fees under 1% per transaction. If payment is peer-to-peer, there is no fee at all. However, you may have to purchase a crypto wallet.
  • Millennials are hip to Bitcoin – While many older people are averse to new technologies, especially cryptocurrencies, younger generations are more accepting. In many cases, they prefer it. A business that caters to younger people could benefit by expanding customer payment options.
  • Monetary diversification – Older generations have already been trained to diversify assets. Many investors live by the philosophy. Until now, monetary diversification meant holding several national currencies and engaging in foreign currency exchange. Thanks to Bitcoin, monetary diversification now includes a type of currency that can be used both as a form of payment and as an investment class that stores value.
  • Bitcoin may be a hedge against inflation – Fiat currency loses value over time as more is printed. Bitcoin has a cap of 21 million, which means it has a limited capacity. This limitation may make the value of Bitcoin is a hedge against monetary inflation.
  • Bitcoin is also an investment – A small business can accept Bitcoin as payment and convert it the same day to fiat currency, but it isn’t required to do so. Bitcoin can be held indefinitely, and if the value increases over the amount of the payment received, that value is stored until the Bitcoin is sold or the market turns. While this could result in capital gains taxes, those taxes do not have to be paid until the asset is sold.

The Cons of Bitcoin as Small Business Payment

While there are many upsides to accepting Bitcoin for small business payments, there are some downsides. Consider these:

  • Market volatility – There is no regulation of cryptocurrencies. Around the globe, authorities are discussing how to implement sound regulation, but, as of now, market forces dictate the price of Bitcoin and there is wild volatility from day to day. If the value of Bitcoin goes down before your small business exchanges it for fiat currency, you could lose money on the sale. 
  • Security concerns – Cryptocurrency exchanges have lost millions of dollars in hacks. While Bitcoin is more secure than some payment methods, caution is advised, and experts warn that the safest and most secure storage is offline in what is called a paper wallet.
  • Every transaction is public – Bitcoin transactions are recorded on a public ledger. This ensures transparency, often considered a Bitcoin payment benefit. However, because each transaction is recorded on a public ledger that anyone can see, if a wallet address identification is leaked or hacked, that’s a major security concern. The onus for protecting that information is on the wallet owner.
  • Wallet addresses are unrecoverable – If a small business merchant loses the owner access key to their wallet, those keys are not recoverable. There is no central record of wallet addresses or cryptographic access keys. The only person who has it is the wallet, and that means it must be safeguarded. If your wallet is lost, any Bitcoin stored in the wallet is gone forever.

Small businesses should do their homework before accepting Bitcoin. There are many pros to doing so, but ensure it makes sense for your business before deciding to accept Bitcoin as payment.

Allen Taylor is not an investment advisor or tax expert. Nothing in this article should be construed as either investment or tax advice. Consult your professional advisor before you make decisions regarding cryptocurrency as an investment or payment option. 

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