Accepting online payments
Advantages and disadvantages of using cryptocurrency
Cryptocurrency is a digital version of money that takes the form of virtual tokens or coins. You can use it to buy or sell items from people or companies that accept such payments.
There are a range of cryptocurrencies available including, Bitcoin, Ethereum, Litecoin and Cardano, each with individual values and rules. Bitcoin is currently the most widely used.
To make a Bitcoin payment, Bitcoins are transferred from a digital wallet, which are obtained when you buy the currency from a crypto exchange, to someone else’s using an app or website and the person’s unique Bitcoin address.
Advantages of using cryptocurrency
Using cryptocurrency could offer opportunities for some businesses. The benefits may include:
- A cryptocurrency transaction is generally a quick and straightforward process. For example, Bitcoins can be transferred from one digital wallet to another, using only a smartphone or computer.
- Every cryptocurrency transaction is recorded in a public list called the blockchain, which is the technology that enables its existence. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undoing transactions.
- Blockchain aims to cut out intermediaries, such as banks and online marketplaces, which means there are no payment processing fees.
- Cyptocurrency payments are becoming more widely used, amongst large organisations, and in sectors including fashion and pharmaceuticals.
Disadvantages of using cryptocurrency
There are some business disadvantages to using cryptocurrency:
- It is possible to lose your virtual wallet or delete your currency. There have also been thefts from websites that let you store your cryptocurrency remotely.
- The value of cryptocurrencies such as Bitcoins can change significantly, so some people don't feel it is safe to turn 'real' money into Bitcoins.
- The cryptocurrency market is not regulated by the Financial Conduct Authority (FCA) so there are no rules in place to protect your business.
- If companies or consumers move to a new cryptocurrency from you or stop using digital currencies entirely, it could lose value and become worthless.
- Cryptocurrency exchanges are vulnerable to cyber attacks, which could lead to an irreparable loss of your investment.
- Cryptocurrency can be vulnerable to scams. Scammers often use platforms like Facebook, Instagram and Twitter to trick people into these investments. If you suspect you’ve been targeted, it's important to report this to Action Fraud as soon as possible. Read more on how to report a cyber crime.
Cryptocurrency can be a risky investment and you should only consider investing if you're financially equipped and willing to lose any money that you put into it.
Read further guidance on cyber security for business.