Digital currencies have become convenient and widespread payment methods. Currently, 100,000 merchants worldwide do accept Bitcoin as a mean of payment. That includes some big-name brands like Microsoft, Expedia and online-electronics retailer Newegg. This definitely gives customers confidence and trust in such a payment method. There are, though, a few risks connected to payments through cryptocurrencies.
Bitcoin payments are processed by a private network of computers linked through a shared program. Each transaction is simultaneously recorded in a “blockchain” on each computer that updates and informs all accounts.
One of the main insurmountable dangers of paying with cryptocurrencies is their volatility. In the case one wants a refund for a purchased item, it may be quite difficult to receive such due to the changes in the prices of the currency. To insure oneself against such situation, one may discuss the refund policy in advance and ensure that the agreement reached is fixed and will take effect.
Since digital currency is created and stored electronically, it is obviously not overseen or backed by any of the national governments. Without a regulatory agency, the value of Bitcoin can fall just as quickly as it can rise, depending on demand. Moreover, payments made with virtual currencies are not only irreversible, they also do not have the same legal protections as most traditional payment methods, such as the ones you have when using a credit card.
Risks of Accepting Cryptocurrencies as Payment Methods
Cryptocurrencies pose risks not only for those who pay with them, but also for those accepting such payments. There is a great number of businesses, small and big, allowing customers to settle payments through cryptocurrencies. Here are some hazards to such companies’ operations stemming from the usage of alternative digital currencies:
- Technical barriers: to employ such method of payment, one should set up a digital wallet on a digital currency exchange, which is sometimes technically prohibitive for small business owners unfamiliar with the technology.
- High volatility: for companies it means that they may lose significant sums of money because of the currency’s depreciation, and this may bring significant losses to the whole business.
- Poor security: security is also an issue, as not every cryptocurrency is safe in use and operations. Cyber attacks, hacks, and money thefts are frequent for this industry and have to be accounted for.
- Absence of regulations: lawmakers are still drafting regulations to govern the industry. Once these are ready and in force, they are likely to evolve further, meaning business owners will have to be adaptable.
Even though there is a number of dangers associated with usage of cryptocurrencies instead of the more traditional payment methods like cash or banking cards, it still worth being used. Given the convenience, speed, transparency, anonymity, low taxation, cost-efficiency, and other features of the digital currencies, these will be heavily used in the future despite the possible drawbacks.