While various governments around the world are looking at ways to regulate Bitcoin, companies dealing in virtual currencies are subject to subpoenas. This should come as no surprise, as any company in the world needs to adhere to specific laws of the country they operate in. That being said, subpoenas for a Bitcoin payment processor are a clear sign of why centralized services are not the answer.
BitPay – Largest Centralized Bitcoin Payment Processor
When a merchant wants to accept Bitcoin payments directly, they will more often than not choose the cookie-cutter solution and sign up for an account with one of the many payment processors available. From a convenience points of view, it only seems to make sense to do so, as these payment processors offer double=spend insurance and convert Bitcoin to fiat currency on behalf of the merchant
This is also where the problem lies, as Bitcoin payment processors – such as BitPay – are touching customer funds directly. Bitcoin transactions are sent to addresses generated by and belonging to BitPay; and the conversion to fiat currency is done through exchange and bank accounts belonging to BitPay as well. If there was ever a pure example of a money transmitter, Bitcoin payment processors are a good fit.
It should come as no surprise then to find out that these Bitcoin payment processors are being closely monitored by government officials. Finding out who is receiving the funds, or where goods are sent to is of great value for tax revenue services, as hardly any Bitcoin transaction is subject to taxation right now.
As a result, both merchants and customers could become the subject of potential tax evasion schemes. Merchants receive earnings in Bitcoin – despite being converted by BitPay to fiat currency – which is not taxable [yet] in most countries. On the other hand, it is hard to determine whether or not merchants are selling legal goods.
Should a package be intercepted by customs or the local post office and there is reasonable doubt regarding its contents, finding out who paid for this item plays a key role. With Bitcoin, that process is slightly more difficult ,despite the blockchain offering complete transparency as far as transactions go. Pseudonymity allows customers to not disclose any personal information during the payment process.
Finding Alternative Ways to Accept Bitcoin Payments
One way to fight the mounting number of subpoenas plaguing BitPay and other Bitcoin payment processors around the world, is by making merchants accept virtual currency payments without relying on centralized services. Even though this will require slightly more work on behalf of the merchant, the entire setup process only takes 15 minutes at most.
That being said, the services offered by Bitcoin payment processors goes far beyond enabling Bitcoin payments. Creating invoice through APIs, converting local fiat currency to its corresponding Bitcoin value at that time and receiving fiat currency payments the next business day without additional fees are part of the complete package.
Whether or not “one-click Bitcoin payments plugins” will offer a proper solution to this problem, remains to be seen. Accepting Bitcoin payments on the merchant’s own accord is a favourable option, yet it doesn’t protect the merchant from Bitcoin’s volatility.
Images courtesy of BitPay, Shutterstock