Home » Accepting Bitcoin as Payment at Your Business — Good Idea or Bad?

Accepting Bitcoin as Payment at Your Business — Good Idea or Bad?

by Chris Poindexter

A Bit About BitcoinsAccepting Bitcoin as payment for your business can be as easy as accepting any other type of electronic payment. You don’t need any kind of payment processing system to accept Bitcoin, but there are some advantages to using a payment service for small business.

Easy and anonymous exchange was one of the features built into the digital tokens from the very beginning, and it’s one of the qualities of Bitcoin that gives government regulators a twitch. When you write a check or use a debit card, it kicks off a whole series of transactions, starting at your bank, which takes the money out of your account. But your bank can’t just send the money straight to the bank of the person cashing your check, which would be far more efficient. Instead the transaction goes in an electronic queue and, at intervals during the day, those transactions ping-pong their way through the Federal Reserve System (you knew they did something, right?) and eventually ends up in the depositor’s account. That’s why your bank doesn’t give you the money right away for a check you deposit. They have to wait for that process, which is much faster these days, but still slow by modern standards.

Bitcoin cuts through all that overhead. You don’t need banks, the Federal Reserve System, or anything but a piece of software, called a “wallet,” that you can download for free. Your digital Bitcoin wallet is encrypted with a secret piece of data called your “private key.” That private key identifies you uniquely in the Bitcoin system, called a “block chain,” and is used to validate that your Bitcoins actually belong to you.

Bitcoin merchant exchanges are relatively painless, and add an extra layer of security…

As a business, you can set up your Bitcoin wallet and use it to accept payment if you wish, exchanging your Bitcoins for real-world cash at one of the many exchanges. If you manage Bitcoin payments that way, expect scrutiny from government regulators — who all seem to think that Bitcoin is a giant tax avoidance scheme.

Another option is setting up a merchant account with a vendor like Bitpay, which works just like any other payment processing system. Your customers can pay for orders with Bitcoin, and the exchange vendor handles the conversion to cash for you, for a small fee. This way Bitcoin becomes just another payment option, and your business processes remain exactly the same as with any other type of payment system. You don’t have any control over where your customers get Bitcoins anymore than you do on where they get cash or any other form of payment.

Bitcoin merchant exchanges already work closely with government regulators and, while the extra player increases the overhead of transactions, it’s relatively painless, and adds an extra layer of security for you as a business owner.

What makes the government nervous is the ability of Bitcoin to skirt the Federal Reserve System, and the attendant oversight and monitoring. I’m going to guess that will never change — so, if you’re going to accept Bitcoin as a merchant, think about using a payment processing service.

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