Bitcoin – Endorsed by WordPress but is it good enough for your business?
On November 16, 2012, blog publishing service WordPress announced they will accept bitcoin as a payment method for service upgrades.
I applaud WordPress for adding a new payment method because my philosophy is that the more payment methods an online seller offers his or her clients, the better. The easier you make it for your customers to pay you, the better it is, specially compared to competitors who may not be offering as many payment options.
This may be well and dandy for WordPress, but I certainly would not be willing to recommend that my clients and/or friends accept bitcoin as a payment method. Why?
To start with, bitcoin is a community created digital currency. It is not backed by US dollars, Yen, Swiss Francs, RMB, Gold, or anything of intrinsic value other than the inferred value infused into the currency by its devoted users.
The fact that a good number of people and businesses accept bitcoin as a payment method, does not give it long term stability and an historic track record as a store of value and wealth. Outside of the digital domain, bitcoins have zero portability, nor can they be transferred via established and trusted financial instutions and networks.
In my personal opinion, which you may disagree with, accepting bitcoin payment brings inherent risks for an online business owner. Yes there are people today who will accept bitcoin for goods and services. Will they accept it tomorrow, next week, or next year? I cannot give you a definitive answer. Nobody can.
Will people accept gold bullion, US dollars, Swiss Francs and Japanese Yen in exhange for goods and services next week, next month, and next year? I can answer with complete confidence that the answer is yes.
The Dutch tulip bubble burst of the 1500s teaches us that items of non-historically intrinsic value are risky, and cannot be counted on as a reliable long-term store of wealth and value. It is as simple as that. The value of bitcoins can evaporate into thin air over-night. The value of a one troy ounce 24K Gold Maple Leaf coin will not evaporate into thin air over-night.
In conclusion, it is great that WordPress accepts bitcoins as payment for their services. I guess they can afford to write off any future losses should bitcoins fall by the way-side.
But I cannot recommend that you as a small business owner, who relies on every penny you earn, accept bitcoin for your business at this time. It would be non-prudent advice to recommend accepting bitcoin, and until bitcoins are accepted for deposit by your financial institution, I strongly stand by my position.
You lack understanding of the possibilities that merchants have regarding bitcoins. They don’t actually have to even touch bitcoins if they are afraid of the volatility of the currency. They can:
1) Price products in local currencies as usual, but accept bitcoins as payment
2) Receive local currency into their bank account
In fact, the prime example you mention here, WordPress, doesn’t touch bitcoins at all! They use BitPay (https://bitpay.com/?oid=1005_1) to handle the payments and they have chosen the plan where the merchant gets dollars into their bank account. The fee is a reasonable 2,99% without any starting fees or monthly fees.
If the merchant is “brave enough” (it really doesn’t require much bravery, most merchants that accept bitcoins have low bitcoin volume compared to other currencies so the risk is manageable) they can take the “Bitcoin plan” which has only 0,99% fees.
In conclusion, it would be simply stupid for a merchant to not accept bitcoins at this time. At least with services such as BitPay that remove the risk.
You have taught me something .. thank you for the post.
So if I understand you correctly, Bitpay is a third party online payment processor that will process the payment to the online merchant seamlessly in the merchant’s home country currency, the merchant can keep goods and services priced in the home country currency, and the merchant is completely removed from dealing with the bitcoins. This appears to be a good solution.
As you point out, Bitpay takes on all the exposure in dealing with the conversion of bitcoins into the merchant’s home country currency, this is also good.
However, before I could prudently and professionally recommend Bitpay as a payment method to my merchant clients, I would want to know a few things about them:
1) In which country are they registered as a licensed money remitter?
2) How long have they been in business?
3) Which countries are they operating in?
Before dealing with any online payment processor, it is extremely important (in my personal opinion) that the processor is legally licensed as a money remitter in a first world banking regime such as the UK, Canada, US, Australia, New Zealand, or the Euro Zone.
If the online payment processor is not registered as a money remitter in one of these jurisdictions, merchants and other users of the Bitcoin system would have no legal recourse in the event of problems.