Businesses can sell goods online for cryptocurrency. Tax risks are not regulated, but charges are lower

Mind has previously reported on the first cryptocurrency card in Ukraine and the way it works. But this is not the only option that allows you to pay for goods and services with digital assets rather than fiat money. Many Ukrainian stores introduce online payments with cryptocurrency for their goods. Among them are Foxtrot and Varus retail chains, Rechi.ua online store, Okwine wine market. Charitable Foundation Tabletochki accepts donations in cryptocurrency as well.

And for the buyer, everything looks quite familiar. He selects the desired product, and just indicates cryptocurrency as his payment method, not Visa or ApplePay card. The merchant processes the transaction, receives the required amount and confirms the purchase.

Mind examined how crypto processing works, and how convenient and safe it is.

What crypto processing is. Many people are aware of what bank processing means. In layman's terms, this is processing of non-cash payments made by the buyer/customer in favour of the seller using his bank card.

The cardholder wishes to pay for goods in a brick-and-mortar store or an e-shop. To achieve this, he/she may either use a POS terminal that is physically installed at a retail outlet, or enter the card details on the seller's website in case of online payment.

Before getting to the seller, the payment is verified, which involves several links. These are: the bank that issued the payment card (issuer), the bank that serves the seller's accounts (acquirer), as well as the processing centre that ensures the security and continuity of payments, i.e. is responsible for maintenance.

The reasons you need a crypto processing platform. The buyer cannot send the seller a payment directly. Or rather, in theory, it is possible if the seller has the details of his digital wallet published on his website. And buyers will transfer money for each purchased product.

But, at first, it is not very comfortable: with a large volume of sales, you can simply get confused in payments. Second, with this approach it is impossible to integrate the payment system with accounting, record keeping, logistics, etc.

How to connect to crypto processing. There is a fairly large number of platforms that process digital asset payments. Roughly, such services can be divided into two groups:

• Platforms owned by or related to cryptocurrency exchanges. Such as BinancePay (Binance exchange) or Whitepay (WhiteBit exchange).
• Third-party solutions from independent developers – Cryptomus, Coingate, Any.Money, etc.

Meanwhile, the mechanism for connecting crypto processing and its integration is everywhere more or less the same.

1. The seller signs on at the platform that provides processing and receives a merchant account.
2. When the account is created, the merchant has access to a programme code (API).
3. This API has to be integrated into the e-store as the payment form.
4. Then, the buyer has the ability to select cryptocurrency as a payment method when placing an order.
5. The seller, for his part, sees all the received funds and can further dispose of the money (for example, withdraw it to the cache).

Although, in Ukraine, payments are made in the national currency – hryvnia. Therefore, the first mechanism with conversion is activated when making payments.

How cryptocurrency payments are done. The procedure is quite simple for the buyer and does not much differ from paying with a bank card.

• The buyer finds the desired product in the online store and puts it in the basket.
• Then, when making the order, he selects to pay with cryptocurrency.
• At the final stage, the buyer receives a payment invoice as a QR code.
• The code has to be scanned to get a unique address for transferring the required sum.
• The sum is automatically debited from the crypto wallet or the buyer makes the payment manually.

The merchant physically receives the payment to his account in 15-20 minutes. This is the time it takes to process the transaction, send it to the blockchain and record confirmation from the blockchain nodes. For we remember, cryptocurrencies is a decentralised system. That is, each payment is like a puzzle that is built from pieces.

Peculiarities and disadvantages of crypto payments. Since all operations related to cryptocurrency payments are still in their infancy, such payments are imperfect and have disadvantages for both sellers and buyers:

1. Lack of a clear legal framework. Cryptocurrencies in Ukraine are still not properly regulated at the legislative level. Therefore, any disputes related to payment in digital assets will be extremely difficult to resolve, via the court in particular.
2. Dependence on crypto processing. The reliability and continuity of payments is in fact directly tied to the platform that provides processing. If something happens to it (technical failure, fraud, hacking), it is almost impossible to return the money that has been suspended or lost.
3. Conversion risks. The cryptocurrency market is very unstable, and the bitcoin rate can change by several percent in a matter of minutes. Therefore, to ensure that the buyer does not overpay for the goods, and the seller receives exactly what he expected, it is important that the crypto processing fixes the rate at the time of payment. This is especially critical if the buyer sends cryptocurrency and the seller receives fiat. As soon as the processing receives an application for payment processing, the service freezes the rate for a time, normally 15-20 minutes. Just enough for the buyer to make the payment.
4. Lack of a universal payment format. When it comes to bank cards, the payment mechanism has long been worked out. The buyer enters the details and the amount is automatically written off from the account. Not everything is so obvious with cryptocurrencies. For example, if the seller uses the crypto-processing by one of the exchanges, the buyer needs a wallet that was opened on this particular exchange for payment. Otherwise, he will have to ask the seller for a direct payment link to send money.

What is the difference between banking and cryptocurrency processing?

	Bank Processing	Crypto Processing
Payment chain participants	Buyer, issuing bank, acquiring bank, processing centre, merchant	Buyer, crypto transaction processing platform, seller
Ways to verify payments	BankID, digital key (EDS), one-time password system	KYC of the platform on which the buyer's crypto wallet is created and double authentication with one-time passwords
API availability for integration	Yes	Yes
Adjustment of the payment form to the customer	Yes	Yes
Technological protection of transactions	Independent payment gateway	Окремий платіжний шлюз та блокчейн
Payment processing speed	Debiting from the card – instantly, crediting to the seller's account – 1-3 banking days	10-20 minutes (depending on the blockchain)
Charge to be paid by the seller	1-2% of the transaction	0.1-1% of the transaction
Conversion of payments	According the rate of the issuing bank or the rate of the international payment system (Visa, MasterCard)	According the rate of the exchange to which the crypto-processing is tied, or the average market rate of the cryptocurrency
Tax implications	The merchant gets profit from the sale, which is subject to taxation. The tax rate depends on the taxation system of the seller of the goods (general or simplified): a legal entity under the simplified taxation system pays 5% of the turnover; an income tax payer pays 18% of the income tax.	The merchant gets profit from the sale, which is subject to taxation. The tax rate depends on the taxation system of the seller of the goods (general or simplified): a legal entity under the simplified taxation system pays 5% of the turnover; an income tax payer pays 18% of the income tax.
Legal clarity / Guarantee of transactions	Legislation that regulates banking, regulatory framework of the NBU.	Contractual obligations of the crypto platform and its good faith.