Accepting Cryptocurrency on Shopify

July 28, 2022

Not sure whether to accept crypto on your Shopify store? Learn all the pros & cons, and what it means for your finances and taxes.

Accepting Cryptocurrency on Shopify

In a good economy, growing a DTC brand isn’t easy. In today’s economic recession, the competition for consumers’ attention is brutal. 

To thrive in the ecommerce space, you need to stay ahead of the curve to convert customers. One way that's been trending among many DTC Shopify brands is accepting cryptocurrency payments on Shopify.

Let’s discuss the pros and cons and what it could mean for your business’s finances.


What is cryptocurrency?

Cryptocurrency (or “crypto”) is a digital or virtual currency that's often referred to as coins or tokens. It’s becoming a mainstream way to make online purchases. Common types of crypto include Bitcoin, Ethereum, and Dogecoin.


Should I accept cryptocurrency as a form of payment?

As of 2020, Shopify started accepting crypto payments as a payment method. This means that as a Shopify seller, you can accept crypto payments from your customers by enabling one or more crypto payment platforms, such as Coinbase Commerce,, Strike, BitPay, DePay, and OpenNode.

There are a lot of advantages to accepting cryptocurrency as a payment method. Here are some key ones:

  1. Access to broader markets - crypto payments allow customers from every place in the globe to easily send payments with no additional intermediaries like banks and payment institutions. More markets mean more customers, and more customers mean more income. 
  2. Better experience for customers - as an online seller in the competitive DTC space, you want to provide your customers with the best experience so they’ll return to your site (and increase the lifetime value (LTV)). Accepting crypto payments provides your customers with greater flexibility, giving them a more delightful experience. 
  3. Lower processing fees - cryptocurrencies have lower processing fees than those charged by traditional payment processors. Lower processing fees mean higher gross profit. That’s an easy cash saver! Helpful hint: to understand how much you can save, calculate your profit margin using the different processing fees and compare your resulting margin.
  4. Faster processing - crypto payments are instant and transferred in real-time, unlike traditional payment processors which can take a few days. It’s all about the cash flow! 
  5. No chargebacks - dealing with customer disputes and chargebacks can be burdensome and result in revenue loss for your business. With crypto, there is no concept of chargebacks. Only the merchant has the ability to reverse a transaction.
  6. Better security - cryptocurrency is more secure and does not need third-party verification. The blockchain ledger verifies and records each transaction making it practically impossible for someone to steal your identity.

While there are a lot of benefits to accepting crypto, there is one major drawback. The value of cryptocurrencies is extremely volatile and unpredictable. For some ecommerce sellers, it’s not worth the risk.

If you decided you’re good with getting paid with crypto, let’s go step-by-step to get you all set-up.


How to accept Crypto Payments on Shopify

Shopify has made the set-up process for this pretty easy. 

Step 1: First, open an account (wallet) in one of the crypto payment platforms supported by Shopify. 

Step 2: Then, connect this account to Shopify, by following these steps: 

  1. In your Shopify admin, click on Setting at the bottom left corner. Then go to your Payments tab.
  2. In the Additional payment methods section, click Add payment methods.
  3. Search and choose the relevant crypto payment platform, click Activate and then click Connect.  
  4. Enter your account credentials, then select the relevant cryptocurrencies you wish to accept, and click Activate to enable the provider. 

That’s it! Now your customers are able to use this payment method at their checkout. 


What do crypto payments mean for your finances?

If your customers pay you with cryptocurrencies, be prepared that it’s not treated the same as credit card payments when it comes to your financials. 

Even though the name ‘Cryptocurrency’ may suggest it’s ‘currency’, it’s actually not. For accounting purposes, it’s a type of ‘property’ and should be treated in your books as a capital asset and not as cash. 

It shouldn’t change your level of revenue from the customer, but you may need to record a capital gain (or loss) when you sell the cryptocurrency or when you use it to buy something else. 

Let’s take an example. Say you sold a product for $1,000 on January 1. The customer pays you 1 Bitcoin for this sale. At this point, record income of $1,000 in your P&L and a crypto asset in your balance sheet of $1,000 (instead of cash). Your amount of income establishes your cost basis in the coin. 

On February 1, 1 Bitcoin is worth $1,500 and you decide to sell your coin. Record capital gains for the sale of the crypto asset of $500 ($1,500 less $1,000 of your cost basis). The same also applies if, instead of selling your Bitcoin for $1,500, you use it to pay for $1,500 worth of inventory, marketing expenses, or even to pay a dividend. 

Bear in mind that there are types of cryptocurrencies that are linked to USD, so by accepting them you will not be subject to fluctuation risks. 


Cryptocurrency and taxes  

Your income is subject to tax at the same rates whether you receive cash or crypto. The main difference arises when you use the cryptocurrency to pay for purchases, sell it, or trade it for another type of crypto. 

The IRS treats cryptocurrencies as ‘virtual currency’, which is treated as property for tax purposes. It basically means that whenever you somehow dispose of the coin (by using it to purchase something, selling it, or trading it), the disposal results in a capital gain or loss for your business and should be reported on Form 8949 and filed with your tax return. 

Here’s how to calculate the capital gain or loss: 

The IRS allows two methods to allocate your cost basis to a specific sale:

  1. FIFO (first in first out), or
  2. Specific identification

Without getting into too much detail, for both methods, you’ll need to keep records of how much the crypto was worth on the date of each transaction you made.

Don’t worry - not all crypto transactions are taxable. Buying cryptocurrency with cash is not taxable and neither is transferring units of a particular cryptocurrency between wallets you own. There are also some exceptions for gifting and donating cryptocurrencies, which may not be taxable either. 

When starting out, make sure you speak to a professional so you can avoid a showdown with the IRS.


Final thoughts 

With cryptocurrency payments on the rise, more ecommerce sellers are looking to accept crypto as a payment method from customers. While it includes significant benefits compared to traditional payment methods, it's important to keep in mind that there could be some risks and tax implications that make it a bit more complex to manage in your books. It’s good to use an ecommerce bookkeeping expert, like Finaloop, to make sure you're tracking this correctly. 


About Finaloop

We are a technology company providing automated end-to-end accounting service to ecommerce businesses. Our system connects to your apps, syncs all your data and reconciles your books in real-time, replacing your bookkeeper. We offer reconciled books available 24/7, tax-saving insights, and a single place for all your financial data.

*The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns.*

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