If you’re a business that accepts cryptocurrency payments, you have to consider your company’s sustainability from all angles. For instance, you have operational expenses and profit margins to consider.
Since crypto like Bitcoin, Litecoin, and Monero fluctuate in price, you have to have a strategy for locking in the value of your sales to ensure profits in US dollars (USD). But you also have to factor in any associated fees for converting crypto to fiat. We’ll discuss what you need to know about these fees, what your different options are, and what to expect with those options.
How Much Does It Cost to Convert Crypto to Fiat?
The fees for converting crypto to fiat vary depending on the platform you use. We’ll break down the different platforms used to convert crypto and their methods for charging fees. It’s important to know that fee schedules and conversion rates change frequently, so always stay on top of the current rates for the platforms you decide to use.
Converting Crypto to Fiat (US Dollars)
The two main types of platforms for converting crypto to fiat are cryptocurrency payment processing providers (also called payment gateways) and crypto exchanges.
What Is a Cryptocurrency Payment Processor?
These platforms are the crypto equivalent of credit card payment processors. Two of the most popular platforms are Coinbase Commerce and BitPay.
When you use a payment processor, they facilitate your customers’ cryptocurrency payments and convert them into the fiat value the instant the transaction is complete. So, the fee includes the platform handling all your customer payments, including the final conversion.
Coinbase Commerce Fees
Coinbase Commerce provides the most straightforward conversion fee, at 1% of the value of your customer’s transaction. This 1% fee includes handling the transaction and converting it to USDC, a US-regulated cryptocurrency that remains pegged 1:1 to the value of a dollar (also called a stablecoin). You can withdraw your USDC earnings to your US-connected bank account at any time.
BitPay
BitPay is similar to Coinbase Commerce, but fees are a bit more complicated. BitPay charges 1–2% + $0.25 per transaction and settles each transaction in fiat to your bank account every day.
The percentage you pay depends on the monthly transaction value of your sales. Less than $500,000 USD costs 2% + $0.25, and $1,000,000 and more volume per month costs 1% + $0.25 per transaction. BitPay also charges higher fees for what they consider high-risk industries.
What Is a Cryptocurrency Exchange?
Compare crypto exchanges to how people buy and sell stocks. Users deposit crypto (and sometimes fiat) into their exchange account and are able to trade one cryptocurrency for another. If you wish to convert crypto to fiat using an exchange, this is typically done as an individual and not a business.
There are numerous cryptocurrency exchanges to choose from, but there are two main categories:
- Centralized exchanges: A centralized cryptocurrency exchange (CEX) follows all national and international regulations to operate, which includes collecting personally identifiable information on customers, storing that data, reporting user earnings, and requiring strict security processes like KYC/AML (know your customer, anti-money-laundering). An exchange is centralized when the platform provider hosts the website for every customer and facilitates every trade. Every user has an account registered with the CEX, placing trust in the CEX as a third party for protecting user funds, following applicable laws, and providing fair and accurate trades between different cryptocurrencies.
- Decentralized exchanges: A decentralized crypto exchange (DEX) is a peer-to-peer exchange where the site facilitates trades directly between different members without using a third-party intermediary to exchange user funds. Instead of a bank, a broker, or other escrow, the actual blockchain technology is used to execute trades between users. DEX platforms are usually anonymous, meaning the platform creators don’t have any user data.
Cryptocurrency Exchange Fees
Most cryptocurrency exchanges charge fees based on a tiered system. Similarly to BitPay, exchanges base your fee on the last 30 days of trading volume. The higher the volume of trades, the lower the fees.
Fees range from 0.10% of the transaction to 5%, depending on monthly volume.
Swap Exchanges
Cryptocurrency exchanges often provide a simplified version of trading called a swap. This provides an easier user interface where you simply select the cryptocurrency you own and the crypto you wish to convert it to.
Swap exchanges usually do not charge an explicit fee—but the exchange still turns a profit. This is made possible by offering a higher exchange rate for the coin you swap to, meaning you’ll end up with less of the final currency than the trade actually justifies. Swaps usually end up costing 3–5% when factoring the difference between the actual value and what the user receives.
When Do You Have to Pay Cryptocurrency Fees?
Three main situations involve paying a fee when using crypto.
- Sending Crypto
When you send cryptocurrency from one account to another, you are withdrawing it from one crypto wallet and depositing it into another. You should never have to pay a deposit fee.
Exchanges generally charge a withdrawal fee. The amount fluctuates based on industry trends, which differ from one cryptocurrency to the next, based on whether a cryptocurrency’s network is experiencing high traffic.
- Swapping/Trading/Exchanging Crypto
Crypto exchanges charge a fee whenever you exchange one cryptocurrency for another.
- Paying Taxes on Crypto
Whether your business receives payments in crypto or a transaction is an exchange for one crypto to another, every transaction is a taxable event. Learn all about cryptocurrency and taxes.
Can Businesses Convert Large Amounts of Crypto to Fiat?
Yes. Exchanges may limit how large a daily value of crypto you can exchange or withdraw, and payment processors may place limits on a daily or monthly volume as well. But, generally speaking, the only limitation to the amount of crypto you can convert is the total volume of that cryptocurrency currently available.
Top cryptocurrencies like Bitcoin, Litecoin, and Monero trade at such large volumes that it’s unlikely that you would need to convert more than you can manage.
Do You Get Charged for Converting Crypto to Crypto?
Yes, you are charged a fee when you convert one cryptocurrency into another.
Use Your Crypto to Pay for Postage
Often, businesses that embrace crypto don’t want to sell it all. Owners may choose to hold a certain amount of their favorite cryptocurrencies in the hopes they will rise in value. There are also numerous benefits to using your crypto to pay for business supplies and services.
Using crypto to pay for shipping is the perfect example of putting your crypto to use. Consider using Bitcoin Postage for a fast, easy solution to pay for shipping today!