What is a Traditional Bitcoin Payment Gateway?

If you’re running a shop, you need a payment gateway. You need a way for your customers to pay, its pretty simple. As I detailed in my…

What is a Traditional Bitcoin Payment Gateway?

If you’re running a shop, you need a payment gateway. You need a way for your customers to pay, its pretty simple. As I detailed in my last post, there are 3 different type of Bitcoin payment gateways out there on the market, Traditional Payment Gateways, Direct Payment Gateways, and Self-Hosted Payment Gateways. This article is going to take a deep dive into the pros and cons of the former; the traditional payment gateways. Are they right for you? Let’s find out.

What is a Traditional Bitcoin Payment Gateway?

Just to provide a brief overview, Traditional Payment Gateways operate like most fiat gateways. Any payments made are placed into a wallet on their website, it is controlled by them. Then merchants remove the Bitcoin from the wallet to their own wallet when they wish to. Fees are often paid on transactions, and on the removal of the funds. Examples of this include BitPay, PayPal, Coinbase Commerce, Coingape, and Coin Payments.


  1. Easy to Setup and Use
    These gateways are often really easy to set up. Most offer built in plugins for major ecommerce platforms, and many have systems to allow for in person transactions as well. Many of these systems are built to make it easy even for people who don’t regularly accept Bitcoin.

That’s where the value comes from in these payment processors, they are easy to set up and very similar to fiat processors. KYC can slow the process, but normally it can go quickly. If you’re running a complex store with lots of transactions, and are very used to fiat processors, that makes these traditional processors attractive. The processors handle most of the back end, oftentimes you can plug and play. Many will also work with you to provide things like tax forms.

2. Larger More Established Companies
These payment processors are also often larger and more established companies. They have larger infrastructure, and experience working with other large established companies to provide Bitcoin payment solutions. They have the infrastructure to have and support large contracts, and have a sophisticated system for accepting payments.

This can be a big plus if it’s what you are looking for. You don’t have to worry about a lot of contractual aspects, and they have clear cut policies in place. Their establishment also lends to long term longevity, for many they have grown beyond the initial startup phase. They also make it easy to ensure you are following your country’s tax laws.


  1. KYC Required
    The number one con for these companies is KYC, or Know Your Customer. They require a copious amount of information from merchants who use their systems. Because of the type of payment system they use, they use this KYC in case governments demand it. Other types of payment systems don’t require it because of how they process the payments. If you are concerned about your privacy, this is a big flaw. Additionally, because these companies are high profile, and well known to have lots of private info, it makes them susceptible to hacks.

Not to mention, some countries make it impossible to pass KYC. If you’re from a Western country with centralized IDs and easy to get bank, utilities, rent, etc. info the process can work quickly. But if you come from a country without the identity infrastructure in place, there can be long delays and you can even be refused.

2. You Don’t Control Your Bitcoin Until You Remove it
Because these payment solutions use a central wallet, that means merchants don’t have a lot of control over their Bitcoin until it is moved to a private wallet. There is a sense of ease with this method, but it limits usability. Because you don’t control the keys, it honestly isn’t “your” Bitcoin yet, as the age old adage goes. Plus, when you remove the Bitcoin you are often slammed with more fees. That can be a pain.

And this centrally sourced Bitcoin also makes it susceptible to hacks. Just as exchanges can, and have, been hacked, so too can traditional payment gateways. They are a tempting target to hackers, so keeping your Bitcoin on them for long is a very bad idea.

3. Centralized
Bitcoin is built to be decentralized. Unfortunately, these Bitcoin payment processors are anything but. They are built to be centralized; to keep the Bitcoin in a central location, to process the transactions centrally, and operate with centralized business practices. This is what allows them to act like fiat processors, but it comes at a cost. The centralization increases their hack-ability, allows them to charge more fees, and makes it easier for governments and large corporations to keep an eye on you. This is against Bitcoin’s basic tenements. It might not be a major issue for some, but it is something to keep in mind.

There are many pros and cons for using traditional payment gateways to accept Bitcoin. Although there are many negatives, there are also many positives for merchants to use these types of gateways thanks to the stability they can provide. I hope this has helped in your search for payment gateways. Stay tuned for the pros and cons of Direct Payment Gateways, coming soon…