Cryptocurrencies are virtual/digital tokens secured using cryptography. They offer a FIAT alternative that people can use to pay for products/services online. Unlike FIAT, cryptocurrencies are decentralized and use an immutable, tamperproof ledger.
They don’t rely on banks or central governments, which makes them perfect for people looking to transact without giving up sensitive financial information. Here’s an overview of the main benefits and risks of using cryptocurrencies in your e-commerce store:
Benefits of Accepting Cryptocurrency Payments
Cryptocurrencies have many advantages, among them security, privacy, convenience, and cost-effectiveness. Popular cryptocurrencies like Bitcoin, Ripple, Ethereum, Litecoin, and Tether have become mainstream payment methods in American online casinos and e-commerce stores.
Global stores like Amazon, Apple, and Microsoft accept crypto payments, showing how acceptable digital coins have become. Below are three benefits of accepting cryptocurrency payments from your customers, vendors, and partners:
- Lower Transaction Fees: Cryptocurrencies can reduce transaction costs since they don’t involve payment processors, banks, or other intermediaries. Banks and payment processors charge up to 5% or more, while crypto payments are usually free or charge 1% at most. Lower fees reduce commissions the business pays.
- Access Broader Markets: Cryptocurrencies transcend centralized institutions, providing access to cross-border transactions that don’t require currency conversion. Businesses can complete transactions without exchange rate fluctuations. Crypto payments also expand global reach and customer bases, granting entry into new markets.
- Increased Privacy/Anonymity: Cryptocurrencies are decentralized and not controlled by central banks and institutions, so they don’t require sensitive information. Users don’t have to give up their credit card details or other personal information. Shoppers can enjoy increased anonymity when purchasing items in your store.
- Lower Risk Of Fraud: Eliminating intermediaries leads to quicker processing times and a lower risk of fraud and chargebacks. Crypto payments rely on blockchain technology and immutable ledgers that cannot be changed. Money is exchanged between hands, and transactions cannot be refunded, rescinded, or forged.
- Expanded Payment Methods: Cryptocurrencies broaden the number of payment methods available for online customers. They can complement credit/debit cards, bank transfers, eWallets, and prepaid vouchers. You can offer all popular cryptos, including Bitcoin, Ethereum, Litecoin, Tether, Dogecoin, Monero, Ripple, Cardano, etc.
Risks Of Accepting Cryptocurrency Payments
While cryptocurrencies have many advantages, they also carry risks and challenges. One of the top drawbacks of accepting crypto payments is their volatile and unpredictable nature. The value/price of crypto coins can change, affecting business profitability and cash flow.
If you accept crypto payments and the prices fall before you convert them to FIAT currency, the business can suffer significant losses. However, the price can also increase, in which case the company will claim more profits. Here are more risks of accepting cryptocurrencies:
- Regulatory Uncertainty: Countries have different laws regarding cryptocurrency use, recognition, and taxation. Disparate legislation can result in compliance issues and legal disputes for businesses with customers from multiple jurisdictions. As such, companies must learn the crypto laws in all countries they serve.
- Sustainability Risks: Cryptocurrencies are mined, and the process consumes a lot of energy. Bitcoin mining alone consumes more power per year than countries like the Netherlands. This presents sustainability issues, even as carbon and energy taxes become mainstream. Countries like China already have laws to regulate crypto mining.
- No Centralized Protection: Traditional payment systems like credit cards feature built-in consumer protection. These safeguards prevent fraudulent charges and allow customers to get refunds for such exploitation. Cryptocurrency transactions leave consumers on their own, with anonymity being the name of the game.
Cryptocurrencies first emerged in 2009 with Bitcoin but have made tremendous steps toward becoming mainstream. Modern businesses can accept thousands of cryptocurrencies, including at least 200 popular coins. The top coins are Bitcoin, Litecoin, Ripple, Ethereum, and Tether.
Digital currencies offer many advantages but also carry drawbacks that companies must be aware of. The pros outweigh the cons, explaining the prevalence of cryptocurrencies in modern businesses and online casinos. Cryptocurrencies are also seen as the future of online payments.