Also called: Digital money, Digital cash
What digital currency is
Digital currency is value represented in digital form and used for payments or other financial transactions. The term covers different types of money, so the issuer and the rules behind a payment depend on the specific currency.
Cryptocurrencies such as Bitcoin are not issued or backed by a government, and their market prices fluctuate. Stablecoins are designed to track a reference value, such as the U.S. dollar, and are issued privately. A central bank digital currency, or CBDC, is issued by a central bank. A digital wallet holds the information needed to receive or transfer digital currency.
Digital currency does not automatically lower your payment costs; compare conversion, network and payout charges before accepting it.
How digital currency payments work
Some digital currencies move across a blockchain, a shared ledger that records transactions. A wallet uses an address to receive funds and a private key to authorize transfers. If you control the private key, you control the ability to transfer the funds; losing it can mean losing access.
Your business can receive digital currency directly or through a payment service that handles the transaction and converts supported payments into dollars for payout. Those are different arrangements: one leaves you managing the digital asset, while the other can put conversion and settlement in the service's hands. A blockchain transfer is not a card transaction and does not carry card-network chargeback rights.
What it means for your costs and risk
There is no standard merchant fee schedule for digital currency. A transfer can involve a network transaction fee, sometimes called a gas fee, and a payment service or exchange can charge for processing or converting funds. The available fee information does not establish that digital currency is cheaper than card acceptance for your business.
Compare the full cost of a payment route, including transaction fees, conversion charges, exchange rates and the amount and timing of your dollar payout. Cryptocurrency prices can move between payment and conversion, creating a difference between the sale amount and what your business receives. Digital-currency transactions also do not have a standard card-statement line, so use payout records to reconcile them.
Sanctions rules still apply
U.S. sanctions obligations apply whether a transaction uses digital currency or traditional money. U.S. persons and others subject to U.S. jurisdiction must block property belonging to people on the Specially Designated Nationals (SDN) List, as well as entities owned 50 percent or more in aggregate by blocked persons, and must not engage in prohibited dealings with them.
A digital-currency address can be associated with a blocked person, but published lists of those addresses are not exhaustive. If your business handles these payments, include digital-currency activity in a risk-based compliance process, including appropriate sanctions screening. A business that blocks digital currency must report it to OFAC within 10 business days and annually while it remains blocked.
What you can actually change
You choose whether to accept digital currency, how much operational responsibility to take on and how to check the money received. These decisions affect conversion exposure, recordkeeping and sanctions controls.
- Decide whether your business will hold digital currency or receive converted dollars.
- Compare transaction, conversion and payout terms before accepting a payment route.
- Document the sale, currency, conversion amount and payout so you can reconcile each payment.
- Screen relevant parties and addresses as part of a risk-based sanctions compliance process.
- Choose your settlement. Decide whether your business will manage digital assets directly or receive dollars through a payment service.
- Compare total charges. Review network fees, conversion terms and payout timing together, rather than comparing a single transaction fee.
- Set compliance controls. Include digital-currency payments in your sanctions screening and recordkeeping procedures.
Frequently asked questions
Is digital currency the same as cryptocurrency?
No. Cryptocurrency is one type of digital currency. The broader term also includes privately issued stablecoins and central bank digital currencies, which have different issuers and backing.
Does accepting digital currency lower payment-processing fees?
Not automatically. Digital-currency payments can involve network fees, conversion charges and payment-service fees, and there is no standard merchant fee schedule. Compare the total charges and the dollar payout with your existing payment methods.
Can a U.S. business accept digital currency?
A business can choose a payment route that supports digital-currency payments, either by receiving the currency directly or using a service that converts supported payments to dollars. The business remains responsible for applicable sanctions obligations and for keeping accurate payment records.