While cryptocurrency isn’t as commonplace as emerging payment methods like mobile wallets and other digital payment forms, its use has become more widespread in recent years – and small business owners are taking note.
Bitcoin is the most popular cryptocurrency working its way into the mainstream. If you own a restaurant, you might think about accepting Bitcoin as a payment form to attract more customers to your restaurant and increase your restaurant’s profits. However, you may also be wary of Bitcoin’s price volatility and how it integrates with restaurant accounting systems.
We’ll explore Bitcoin and how it works and examine the benefits and challenges of accepting Bitcoin as a restaurant payment option.
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What is Bitcoin?
Bitcoin was created in 2009, making it the first modern cryptocurrency. It is an all-digital currency that relies on peer-to-peer blockchain technology for tracking and trading. No centralized system, bank or government backs Bitcoin.
Although Bitcoin was primarily designed as a payment form, most people currently use Bitcoin and its cryptocurrency cousins for investment purposes. Still, Bitcoin is by far the most common cryptocurrency businesses accept as payment.
In 2021, Pew Research found that 16% of Americans (and 31% of Americans between 18 and 29) have invested in Bitcoin and other cryptocurrencies, and over 15,000 companies around the world accept Bitcoin, according to Zippia.
FYI: If your personal Bitcoin holdings increase in value, the IRS considers that a taxable event, and you’ll pay up to 37% on your profits. Consider hiring a CPA well-versed in crypto to stay compliant.
How does Bitcoin work?
To accept Bitcoin in your restaurant, you’ll need to sign up for a Bitcoin merchant wallet account via an online platform like Confirmo, BitPay, or CoinGate. Many of these crypto wallets integrate with the best POS systems, as well as shopping cart and commerce platforms. Some of the best credit card processors accept cryptocurrency payments, making it easier for merchants to support Bitcoin payments.
A typical restaurant payment transaction with Bitcoin would go something like this:
- The restaurant shows the Bitcoin-paying customer a QR code.
- The customer scans the QR code; their personal crypto wallet reads the virtual address where it should send the payment. This address is usually a one-time destination code.
- The customer enters their private key, which is like a password, to verify the transaction.
Depending on your restaurant’s POS software or accounting software, you may be able to convert the Bitcoin payment into U.S. dollars for easy accounting and tax keeping.
Did you know? When a business accepts credit cards, transaction approval or denial is immediate. With Bitcoin, it can take up to an hour. Most Bitcoin merchants wait for the sixth blockchain confirmation before deeming a transaction successful.
Should your restaurant accept bitcoin?
There are several compelling reasons why your restaurant should accept cryptocurrency, but you’ll need to seriously weigh the downsides before making a decision.
Here are some upsides of accepting Bitcoin in your restaurant:
- Lower transaction fees. Merchant service providers charge up to 4% per transaction – or even more if your diner is from overseas. Crypto fees can be 1% or less – but watch out for transaction fees called gas fees, particularly with Ethereum.
- Better cash flow. You might wait days to receive the cash from your merchant services provider for customer payments via credit card. With Bitcoin, you’ll receive it within the hour.
- No PCI compliance is required. PCI compliance doesn’t apply to Bitcoin transactions. However, this perk doesn’t count for much if you still take debit and credit card payments alongside Bitcoin payments.
- Business from Bitcoin believers. Many Bitcoin holders are enthusiastic about cryptocurrency and its perceived ability to improve the financial system. If you accept Bitcoin, these individuals may seek you out to support your restaurant. “For marketing-savvy businesses, it is definitely a differentiator to be able to accept Bitcoins, and if you are trying to attract an audience that uses Bitcoin, you may be perceived as a techno-savvy restaurant or establishment,” according to technology futurist and podcast host Ian Khan.
- No chargebacks. Accepting Bitcoin means you can avoid chargebacks. Unlike standard credit and debit cards, consumers can’t contact Bitcoin to have a transaction reversed. The only way you’ll ever reimburse a customer is if you choose to do so.
Here are the downsides of accepting Bitcoin in your restaurant:
- Price volatility. Cryptocurrency exchange rate swings tend to be much more severe in both directions than traditional currency. Here’s an example of Bitcoin’s price volatility and how it might affect your restaurant: Let’s say your restaurant hosts a party of Cambodian citizens celebrating their country’s independence day on November 9, 2021. They spend $1,000. If you took that money in U.S. dollars, it would lose some value through inflation. Bitcoin’s value on that day was $66,938, but on June 18, 2022, it was worth $18,948.80 – a drop of 71.7%. If you accept Bitcoin, you’re also accepting its volatility.
- Wallet security. You may lose all your cryptocurrency if you choose a fake crypto exchange or if your legitimate provider goes under. In financial terms, crypto is still the Wild West compared to standard financial products.
- Future regulation is a distinct possibility. Future regulations are possible if Bitcoin continues to grow in popularity and use. Regulations will likely make handling crypto more difficult and expensive.
- Accounting may be more challenging. Most cloud-based accounting packages aren’t set up to handle Bitcoin transactions. This will make bookkeeping more challenging, especially if you’re regularly converting from dollar to Bitcoin and vice versa.
Tip: If you decide to accept Bitcoin, share the news via social media posts and signage in your restaurant. Consider promoting your restaurant by registering with websites like Coinmap.org and SpendBitcoins to draw in crypto users.
The individual decision to accept Bitcoin
Whether or not you accept Bitcoin depends on your business goals, tech savviness, customer base and desire to explore new tech trends. Bitcoin has come a long way since its introduction. Plenty of companies and enthusiasts have made it easier to include the cryptocurrency in everyday transactions.
Weigh Bitcoin’s conveniences and risks before deciding to accept the cryptocurrency as a payment form for your restaurant.
Andreas Rivera contributed to the reporting and writing in this article.