Bitcoin Merchant Account is a High-Risk Gateway – Why?

Bitcoin currency was the first digital currency built on a peer-to-peer network. It is considered to be the leader in popularity and market capitalization. Bitcoin transactions can be done from anywhere and anytime. However, there is intense competition among cryptocurrencies too. But to acquire bitcoins, you need to get in touch with a bitcoin merchant who will help you get the bitcoin payment gateway and let you pay instantly and with a small commission. These Merchant accounts make purchases more secure for both merchants as well as the buyers.

But the bitcoin merchant account is a high-risk gateway. Why? We’ll find that out in a bit. But before that let’s find out what a bitcoin merchant account is.

What is a Bitcoin Merchant Account?

A bitcoin merchant account gives customers of bitcoin exchanges and other crypto-related currencies the ability to buy cryptocurrencies with credit cards or buy bitcoins with debit cards. In a nutshell, a bitcoin merchant account allows merchants and businesses to accept bitcoin payments from individuals for goods and services they sell or deliver.

Why is a Bitcoin Merchant Account a High-Risk Gateway?

Bitcoin merchant accounts are considered a high-risk gateway by specific banks primarily due to the lack of understanding about how the industry works and the pricing volatility in the cryptocurrency marketplace.

In addition, while bitcoins are becoming increasingly mainstream in the financial world, they have still not entirely shaken their early reputation. The reason being that is being connected with some illegal activities such as money laundering. Thus, banks see it as a ‘reputational risk”, which means they don’t want to be associated with those perceptions.

Let us look through some points to understand how a bitcoin merchant account is a high-risk getaway.

Absence of Law Regulations

Bitcoins are considered to be highly unregulated compared to other financial sectors. There are no strict laws that regulate the bitcoins business and this paints a negative picture for the merchant accounts too. This makes banks and credit processors that rely on the buying and selling of cryptocurrencies highly risky.

For instance, the majority of European banks are against opening a cryptocurrency merchant account. It is seen as trading, which is too risky until the merchant has obtained a forex license.

Automatic Approval

Bitcoin payments are anonymous and irreversible. You will not be charged any additional fees, and you won’t have to provide a credit card statement. This means that customers cannot ask or request a refund and this makes them highly volatile.

Instability

You need to know that as bitcoin falls, all other cryptocurrencies fall along. This leads to high uncertainty and instability related to bitcoin merchant accounts. It depends on the human instinct to go for them or not as they are already not regulated by any kind of law and this clearly reduces its customers.

Illegal Usage

Bitcoins are high-risk even with a license due to the many people who use crypto to buy/sell drugs, money laundering, etc. This is a significant drawback of bitcoins and puts it in a lousy picture.

Experimental Phase Risk

You should know that bitcoins, like any other cryptocurrencies, are still under the development process and the merchant banks have to deal with it. So, there is a high possibility that anything unexpected could happen to it. In addition, there is no historical data and experiences that allow you to assess how much trust you can put into it.

Price Variability

The cost fluctuations in bitcoin merchant accounts are entirely unpredictable in the short term, which adds to the riskiness of its performance. To predict how much bitcoin will cost tomorrow becomes almost impossible. And the factors that cause the variability of their changing values are the large volumes of exchange trading.

Consumer Protection

An unpleasant fact related to bitcoins is that bitcoin merchant accounts do not provide any consumer protection. A perfect transaction cannot be undone, and this is because there is no intermediary guarantor, as in the case of bank cards.

On the Radar of Regulatory Agencies

Recently, regulatory agencies worldwide have begun to pay attention to bitcoin merchant accounts and other cryptocurrencies related to it. While many nations, like Japan and the U.S., have allowed transactions and permitted bitcoin exchanges to operate, China and some other countries along have tightened the screws on their use.

Takeaway

With all the risks mentioned above, it becomes increasingly crucial for you to be decisive when choosing the merchant account for payment gateway. Make sure you are fully informed about the terms of service. Also, all the bitcoin merchants should be aware of where they are reaching their customers and make sure they target people who can afford speculative purchases and are financially educated.

If you are looking for a Merchant Account to accept Cryptocurrency Payments, it’s well worth opening an account with a crypto payment gateway website. It will make the process much easier if you want to add that option to your transactions. Book your demo today on Kryptova.