A cryptocurrency is a digital currency and unlike other digital currencies that came before it, generates a value not dependent on “fiat money”–the physical cash or different currencies that we all know and spend. Credit card processing merchants who are unable to receive standard approvals for their merchant services can now accept Bitcoin, Litecoin, Ethereum, Ripple, and other digital currencies and convert them into fiat currency via cryptocurrency merchant processing.
Bitcoin is the mother of all cryptocurrencies and it was launched in 2009 and introduced the decentralized system that over 4000 crypto coins have also adopted.
Information about the person who invented Bitcoin remains shrouded in mystery, however, a theory about how Motorola, Samsung, Toshiba, and Nakamichi came together to create Bitcoin has been making the rounds.
Cryptocurrency uses encrypted blockchain technology via a hack-proof intended system that verifies and records transactions.
Once a cryptocurrency is transferred from one user to another, it is stamped into the blockchain.
A Brief Background in Cryptocurrencies
Unlike online transactions that rely on payment networks like Mastercard and Visa to veto transactions, crypto transactions are intended to be decentralized and independent.
Technology records and protects transactions by keeping everyone in the network accountable.
The system has no central governing body; instead, everyone in the network is saddled with the task of recording all transactions to prevent double-spending.
Crypto coin users can transact business from any corner of the world, without expensive cross-border fees or using any middlemen.
Cryptography & Cryptocurrency Wallets
Public key cryptography allows encrypted communication between users and is impossible to crack.
A cryptocurrency wallet comprises private and public keys which are used to receive or spend digital currencies.
The public key is made up of 34 numbers and letters. The primary function of this key is to simply send a cryptocurrency from one wallet to the other.
The private key is made of 64 numbers and letters and is the key that confirms the cryptocurrency has been spent by recording it in a public ledger or blockchain.
These 2 keys are interconnected and need to be kept away from prying eyes.
Cryptocurrency is a relatively new technology, however, the requirements of operating a crypto business are similar to running an e-commerce venture.
While the e-commerce business requires the use of a merchant account, operating a crypto business entails getting a cryptocurrency merchant processing account.
Cryptocurrency Merchant Processing Account
A cryptocurrency merchant account is used for business transactions.
Low-risk businesses can open merchant accounts with traditional financial institutions, however, cryptocurrency payment processing can only be facilitated by a high-risk intermediary.
4 Reasons Cryptocurrency is High Risk
One reason why banks stay away from crypto high-risk merchants is that they operate in a relatively new industry.
Financial institutions are very conservative and do not like to take uncalculated risks that could cause severe losses.
Today, investing in crypto coins might look like a good idea, but there is no evidence this will remain the case in the next 10 or 15 years.
Banks are wary of how things can go from great to worse very quickly and choose to avoid them altogether.
Secondly, there is hardly any regulation in the crypto sphere with governments across the world still grasping to understand the growing phenomenon.
This development is similar to the CBD industry that is legalized but extremely vulnerable to new laws and regulations. An unpredictable scenario that could end up costing existing businesses millions of dollars if they are introduced.
Thirdly, the industry is largely unstable. From a trading perspective, crypto is seen as a high-risk asset that can record plenty of profits in one day and a ton of losses the following day.
This volatility is transferred to any business accepting crypto coins as payment for their goods and services.
Fourthly, due to the anonymity that digital transactions provide, cryptocurrencies are often used to pay for illegal arms, stolen goods, drugs, and other contrabands.
Hackers love accepting ransomware payments in bitcoin. There is a growing concern that organized crime syndicates are now using cryptocurrencies to launder money.
Banks are aware of the illegal activities crypto coins are being used for and steer clear of controversies and the courts by not providing services to the industry.
All these reasons make it particularly difficult to open a cryptocurrency merchant account with regular banks.
Merchant services like Square, Stripe, and PayPal also tow the same line because they follow similar guidelines.
These providers provide quick application approval services and may open a cryptocurrency merchant processing account for you.
However, once they discover you are using their platform to buy and sell cryptocurrency payments, they will shut you down without warning and freeze your funds indefinitely.
Get a Cryptocurrency Merchant Processing Bank Account
The best way for a merchant to open a cryptocurrency merchant processing account is to find a high-risk provider.
These special payment processors are experienced in opening merchant accounts in high-risk sectors which include the crypto market.
They take away the hassle of worrying about account violations and allow you to focus totally on your customers as well as growing your business.
Anyone interested in accepting crypto coins like bitcoin, Litecoin, Ethereum, Ripple, and other digital currencies and converting them into fiat money must own a high-risk merchant account first before opening an online wallet account for cryptocurrency transactions.
When this is done, fiat money can be converted to cryptocurrency.
Why Cryptocurrency Payment Processing is Important
High-risk merchants need crypto payment processors because of the protection they offer with the Know-Your-Customer process.
In countries where the virtual coin industry has been legalized by governments, it is required by law for exchanges and providers to collect the personal information of users as a protective cover from criminals targeting the sector.
World’s Most Popular Crypto Coins
- Bitcoin (BTC)
- Litecoin (LTC)
- Ethereum (ETH)
- Ripple (CRP)
- Dash (DASH)
- Bitcoin Cash (BCH)
- Cardano (ADA)
- EOS (EOS)
- Monero (XMR)
- NEO (NEO)
Accepting Bitcoin remains one of the most trusted coins across various industries. Big corporations like Microsoft, Tesla, Marathon Digital Holdings, Square, Galaxy Digital Holdings, and Voyager Digital holding the biggest Bitcoin portfolios.
Ripple and Ethereum are popular with business enterprises, while Litecoin is seen as a quicker and less complicated replica of Bitcoin.
While Bitcoin wallet transactions take 10 approx minutes, Litecoin transactions take approx 3 minutes.
Litecoin also has a larger supply of virtual currency, estimated at 84 million as compared to 24 million Bitcoins. Litecoin algorithms tend to be easier to solve for miners.
If you are currently unable to accept credit or debit cards for your high-risk business, inquire about a cryptocurrency merchant account. Once approved, this will allow you to accept digital coin-based payments and convert them into a fiat currency of your choice while you work on alternate high-risk solutions to accept all other forms of payment.