The State of Crypto Merchant Adoption in 2024

Merchants are increasingly adopting cryptocurrencies like bitcoin and ethereum, reflecting a growing trend towards digital currency payments as a viable alternative to traditional means.

Merchants Embrace Digital Currency Payments

Cryptocurrency is no longer a fringe concept but a rapidly growing trend in the retail sector. Retail organizations are preparing for and embracing digital currency payments.

When an American online retailer became the first major merchant worldwide to accept cryptocurrency as payment in 2014, it was big news. Merchant adoption of cryptocurrencies like Bitcoin, Ethereum, and stablecoins has been steadily increasing in recent years, with a notable surge in 2023.

History of Crypto Merchant Adoption

The adoption of cryptocurrencies by merchants has been a gradual process, marked by several key milestones and challenges.

In the early days of Bitcoin, from 2009 to 2012, merchant adoption was virtually non-existent due to the lack of awareness and infrastructure. The first real-world transaction involving bitcoin occurred in 2010 when a user bought two pizzas for 10,000 BTC, now celebrated as “Bitcoin Pizza Day”.

Between 2013 and 2016, merchant adoption started gaining traction as bitcoin’s popularity grew. Major companies like Overstock, Newegg, and Microsoft began accepting bitcoin payments, lending credibility to cryptocurrencies.

From 2017 onwards, merchant adoption accelerated as cryptocurrencies gained mainstream recognition. A survey by Deloitte in 2019 found that 85% of business leaders believed crypto would become a viable payment option, with 64% reporting significant customer interest in using digital currencies. Companies like AT&T, Home Depot, and Starbucks partnered with crypto payment processors to enable crypto payments.

Overall Merchant Adoption Trends

According to the “Merchant Adoption of Digital Currency Payments Survey,” conducted in collaboration with Paypal, 220 million people globally now use cryptocurrencies, purchasing a wide range of products and services, from travel bookings to sports tickets. This mainstream acceptance is increasingly reflected among merchants, with 64% reporting significant customer interest in using digital currencies for payments. Notably, 83% of surveyed merchants anticipate this interest will rise substantially over the next 12 months.

In 2023, the number of global merchants accepting bitcoin payments nearly tripled, with notable growth in regions such as Central and South America and the Philippines.

It’s not only businesses recognizing the potential of bitcoin but also countries. Próspera, a special economic zone on Roatan Island in Honduras, recently took a significant step by officially recognizing bitcoin as a unit of account, less than two years after adopting it as legal tender. This allows bitcoin to be used for measuring the market value of goods and services.

Areas of use

The main drivers behind this merchant adoption include meeting evolving customer payment preferences, especially among younger demographics, tapping into new markets and customer bases, being perceived as a cutting-edge brand, and reducing fraud risks through irreversible crypto transactions. However, regulatory uncertainty, integration challenges, and price volatility remain barriers to wider adoption

Shopping and Retail: Shopping, cafes, and food were by far the most common types of businesses offering cryptocurrencies as a payment method. Major retailers like Microsoft, Whole Foods, Lush, and AT&T now accept crypto payments. The value of blockchain retail purchases is projected to reach $4.6 billion by 2028, according to a research report by Market Research Future.

Travel and Hospitality: Travel booking platforms like Travala.com allow customers to pay for accommodations globally using cryptocurrencies. Airlines and hotels are also increasingly enabling crypto payments to cater to changing consumer preferences.

Digital Goods and Services: Companies offering digital goods and services like Microsoft, Twitch, and Expressvpn accept crypto payments. This allows customers to directly use their crypto assets for purchases.

Luxury Goods: There is growing adoption in the luxury goods segment, with platforms like BitDials exclusively accepting crypto payments for jewelry and watches.

Charities and Donations: Many charitable organizations accept crypto donations, providing a secure and transparent way to give. In early July 2024, Donald Trump began accepting crypto-based donations, partnering with bitcoin Lightning Network provider Openode to facilitate the donations.

Crypto Streaming Payments: Crypto streaming payments involve dividing a lump sum into tiny micropayments sent every second over a specified period, allowing recipients to accumulate funds in real-time. This is facilitated by blockchain’s near-instant settlement and low transaction fees. Key features include real-time payments, continuous streams, and instant redirection to any crypto address. Use cases include salaries and compensation, subscriptions, real-time investing, and token accrual. Leading protocols in this space, such as Superfluid, Sablier, and LlamaPay, enable gas-efficient streaming across multiple EVM-compatible chains.

Advantages for Merchants

Merchants are motivated to adopt digital currency payments for various reasons, some of which are outlined below. In the “Merchant Adoption of Digital Currency Payments Survey,” 93% of merchants currently accepting cryptocurrencies report positive impacts on customer metrics, including growth in their customer base and improved brand perception.

Lower Transaction Fees: Merchants often incur lower transaction fees when accepting crypto payments compared to traditional online payment methods like credit cards, which charge percentage-based fees. This is especially beneficial for international transactions where cross-border fees can be high.

Reduction in fraud: Credit card fraud, already a significant issue for businesses, surged during the pandemic, with attempted fraudulent transactions rising 35% in April 2020 compared to the previous year. Small businesses are most frequently targeted by this financial crime. Cryptocurrency payments, being final and irreversible unless refunded by the merchant, eliminate the risk of chargebacks and payment reversals, giving merchants greater control over payment oversight.

Expanded Global Reach: Cryptocurrencies are accessible worldwide, allowing merchants to connect with a global customer base and accept payments regardless of location. This expands their potential market reach.

Growth potential: Enabling crypto payments allows merchants to tap into the growing market of crypto users, including younger demographics. Studies show crypto users tend to spend more and are more likely to be first-time customers.

Disadvantages for Merchants

The disadvantages outlined below are real pain points, but as crypto networks mature, these problems have reduced, as can be seen by the increased level of adoption. Most of these challenges will likely be eliminated in the near future, for example price volatility is largely solved by accepting stablecoins, high transaction fees by the deployment of low-cost L1s and L2s. Regulatory uncertainty is thankfully becoming clearer as governments around the world are forced to contend with crypto products. As adoption increases this will put further pressure on regulators to clarify rules around crypto, and create more favorable regulatory frameworks.

Price Volatility: One of the biggest drawbacks is the high volatility and fluctuations in cryptocurrency prices. The value can change drastically within a short period, making it risky for merchants to hold cryptocurrencies as their value could plummet quickly.

Security Risks: While crypto transactions are secure, there are risks of wallets being hacked or exchanges being compromised. Merchants need to ensure robust security measures to safeguard their crypto holdings.

Regulatory Uncertainty: The regulatory landscape around cryptocurrencies is still evolving and varies across jurisdictions. This uncertainty creates compliance challenges for merchants accepting crypto payments.

Accounting Complexities: Accounting for cryptocurrency transactions is complex due to their treatment as intangible assets subject to barter transaction rules. Proper accounting practices need to be established.

High Transaction Fees: While generally lower than credit cards, transaction fees for some cryptocurrencies like bitcoin can be high, especially during periods of high network activity. This reduces the cost-saving benefits.

Have you paid for a good or service with cryptocurrency? Share your thoughts and opinions about this subject in the comments section below.

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