Table of contents
Accepting bitcoin payments can open your business to new customers, but the process can be confusing to understand. How does it actually work? Is it legal? Do you need special tools or technical knowledge?
This guide walks through how to accept bitcoin payments as a business, step by step. You’ll learn what bitcoin is, how businesses use it today, what’s required to get set up, and the benefits and tradeoffs to consider before adding it as a payment option.
Key takeaways
- Bitcoin is a digital currency that allows people to send and receive money over the internet without a bank.
- Businesses can accept bitcoin as a payment method, similar to cards or digital wallets.
- Most businesses use a payment provider to handle bitcoin payments and convert them to local currency if needed.
- Accepting bitcoin can help attract new customers, reduce chargebacks, and support global payments.
- Tools like Square make it easier to accept bitcoin without managing complex technical details.
What is bitcoin?
Bitcoin is a digital currency that allows people to send and receive money directly over the internet, without relying on a bank or traditional payment processor.
Unlike cash, bitcoin doesn’t exist in physical form. It exists entirely online and operates on a global network where transactions are recorded on a public digital ledger. No single company or government controls this network, and transactions are verified collectively by computers around the world.
One of bitcoin’s defining features is scarcity. There will only ever be 21 million bitcoins in existence. This fixed supply is built into the network’s software, which is why bitcoin is often compared to scarce resources like gold.
If you want a deeper breakdown of how bitcoin works, including how transactions are verified and how new bitcoins are created, read our guide on Bitcoin.
How to accept bitcoin payments
Accepting bitcoin is less complicated than it might sound. For most businesses, the setup comes down to four things: understanding the rules, choosing a provider, setting up a wallet, and adding bitcoin to your checkout.
1. Check regulations for accepting crypto payments
Before you accept bitcoin, it’s important to understand how digital currency payments are treated where your business operates.
In the U.S., bitcoin is legal to use and accept, but regulations can vary by state. If you’re simply accepting bitcoin as payment, you typically don’t need a special license. However, requirements may differ if you’re holding large amounts of bitcoin or converting it regularly.
To stay compliant, be sure to check guidance from your state’s financial regulator or department of commerce. You may also want to consult a tax or legal professional if you plan to hold bitcoin on your balance sheet rather than converting it immediately.
If everything looks clear, the next step is choosing a payment provider. Most established providers already handle licensing, reporting, and compliance requirements, which can make the process much simpler for your business.
2. Choose a bitcoin payment provider
A bitcoin payment provider handles the technical steps involved in accepting bitcoin. It processes the transaction, confirms it on the network, and can automatically convert the bitcoin into your local currency if you prefer not to hold it. In many cases, the provider also manages the wallet and security behind the scenes.
When choosing a provider, consider the following:
- Fees: Transaction and processing fees can vary. For example, fees may differ if you convert bitcoin to USD immediately versus holding it.
- Payout timing: Some providers convert bitcoin to local currency and deposit funds quickly, while others allow you to hold bitcoin.
- Volatility management: Automatic conversion can help protect your cash flow from price swings.
- Integration: Look for tools that work with your existing checkout, invoicing, or point-of-sale systems.
Square allows businesses to accept bitcoin within its broader payments ecosystem. That means you can manage bitcoin transactions alongside your regular card, cash, and online payments in one system. Customers check out like they normally would and funds can be deposited to your bank account.
You can also choose how much exposure to bitcoin you want. Some businesses convert all bitcoin sales to USD right away, while others keep a portion in bitcoin.
3. Set up a bitcoin wallet
To accept bitcoin, you need a wallet. A bitcoin wallet doesn’t store physical money. Instead, it manages the digital keys that allow you to receive and access bitcoin on the network.
There are two main types of bitcoin wallets, and the main difference is who controls the private keys.
With self-managed wallets, you control the private keys yourself. This gives you full ownership and responsibility for the bitcoin, but it also means you’re responsible for security, backups, and recovery.
With platform-managed (custodial) wallets, a payment platform holds and secures the bitcoin on your behalf. You don’t manage private keys directly. This is typically the simplest option for businesses that want to accept bitcoin without handling technical details.
For many businesses, a built-in, platform-managed wallet is the most practical option. For example, Square offers a bitcoin wallet that can be managed directly through the Square Dashboard, so you can view balances, manage transactions, and convert funds without managing private keys yourself.
4. Add bitcoin as a payment option in your checkout process
Once you’ve chosen a provider and set up a wallet, the final step is adding bitcoin as a payment option for your customers.
How this looks depends on how you sell. For in-person sales, you can offer bitcoin alongside cards and cash through supported point-of-sale tools. For online sales, you can add bitcoin as an option during online checkout, just like other digital payment methods. You can also allow customers to pay invoices using bitcoin, similar to paying by card or bank transfer.
If you use Square, bitcoin can be integrated into your existing payment setup rather than managed separately. This allows you to manage bitcoin sales, balances, and conversions within the same dashboard you already use for other payments.
Benefits of accepting bitcoin for businesses
Here are some of the main reasons businesses choose to offer bitcoin.
- Attracting new customers: Offering bitcoin as a payment option can appeal to customers who prefer digital currencies or are already using them in their day-to-day lives. For some businesses, this can be a simple way to stand out or meet customer expectations without replacing existing payment methods.
- No chargebacks or reduced fraud risk: Bitcoin transactions are irreversible once confirmed. This means there are no chargebacks, which can help reduce fraud-related disputes and unexpected reversals compared to card payments.
- Global reach: Bitcoin can be sent and received across borders without relying on international banking systems. This can make it easier to accept payments from customers in other countries.
- Investment and diversification opportunities: Some businesses choose to hold a portion of their sales in bitcoin as part of a broader financial strategy. With Square, you can automatically convert a percentage of your sales into bitcoin, allowing you to diversify investments without manually managing purchases.
Drawbacks of accepting bitcoin
Like any payment method, bitcoin comes with trade-offs that you should consider.
- Price volatility: The value of bitcoin can change quickly. If you choose to hold bitcoin rather than convert it immediately, price swings can affect the value of that payment. Automatic conversion to USD can help reduce this risk.
- Accounting complexity: Bitcoin transactions may require additional tracking and reporting, for tax purposes. Depending on how you accept and manage bitcoin, you may need to account for capital gains, transaction records, or valuation changes. Learn more about how bitcoin transactions are taxed in our bitcoin tax guide.
- Irreversible transactions: While the lack of chargebacks can be a benefit, it also means mistakes can’t easily be undone. If a customer sends bitcoin to the wrong address, recovery is unlikely.
FAQs about accepting bitcoin payment
Is it legal to accept bitcoin payments?
Yes, businesses in the United States can legally accept bitcoin as payment. However, you must comply with applicable tax rules and any state-specific regulations related to digital assets.
Do businesses need a license to accept bitcoin?
In most cases, no special license is required simply to accept bitcoin as payment for goods or services. Licensing requirements usually apply to businesses that exchange or hold digital assets on behalf of others. Always confirm with local regulations if you’re unsure.
Why is it difficult for businesses to accept bitcoin?
Accepting bitcoin can seem difficult because of price volatility, accounting considerations, and unfamiliar technology. Managing wallets, confirmations, and conversions on your own can add complexity. Bitcoin payment providers like Square simplify the process by handling these steps in the background, making it easier to accept bitcoin alongside other payment methods.
Are bitcoin payments taxable for businesses?
Yes, bitcoin payments are taxable. The IRS treats bitcoin as property, so payments received in bitcoin are generally subject to income tax, and selling or converting bitcoin may trigger capital gains or losses. It’s best to consult a tax professional to understand how to report bitcoin activity correctly.
Is accepting bitcoin safe for small businesses?
Yes, accepting bitcoin can be safe when using a reputable payment provider and following proper security practices. Many small businesses reduce risk by converting bitcoin payments into USD immediately.
How can bitcoin be converted to USD?
Bitcoin can be converted into USD through exchanges or payment platforms that support automatic conversion. With Square, for example, businesses can choose to convert bitcoin payments into USD based on their preferences.
Do businesses need a bitcoin wallet to accept payments?
Yes, a wallet is required to receive bitcoin. However, businesses don’t always need to manage their own wallet directly. For example, Square provides a built-in bitcoin wallet that can be managed through the Square Dashboard, allowing businesses to accept bitcoin without handling private keys themselves.
