MONTREAL – Will that be cash, credit card or Bitcoin?

A small number of Canadian businesses now accept Bitcoin, the digital currency that made its debut five years ago, and has been gaining momentum ever since.

Among the retailers is Quebec bed-and-breakfast operator David Mancini, who expects the payment method will have a practical appeal for foreign tourists visiting his community of Baie-Saint-Paul.

“You do not have to transfer U.S. dollars to Canadian, or pesos, etc.,” said Mancini, 30, who runs the Gite TerreCiel.

Bitcoin transactions are seen as more convenient than other forms of payments as they are sent directly and instantly from one person to another, avoiding processing and other fees usually charged by banks or third parties. Travellers can avoid avoid carrying cash, or paying fees on travellers cheques or for currency exchanges, said Mancini.

Mancini has already convinced a handful of other community businesses _ the local coffee shop, hair salon, gift shop, acupuncture clinic and Tai chi martial arts school _ to accept Bitcoin, too.

“So if there’s a tourist who comes here, they can spend their whole trip in Bitcoin,” Mancini said.

The half-dozen merchants in Baie Saint-Paul are among 143 Canadian businesses accepting the digital currency, according to the Canadian Bitcoin Business Directory.

To use Bitcoins, users must first set up a so-called digital wallet, which gets managed through an app. The transactions involve buyer and seller scanning each others’ smartphones to transfer the Bitcoins.

Vancouver saw its first Bitcoin automatic teller machine go live in a downtown Vancouver coffee shop last fall, followed by Toronto and Ottawa. Consumers can exchange Canadian cash for the digital currency at the current exchange rate.

But there remain concerns for the business community, according to researcher David Descoteaux, who recently prepared a report on the currency for the Montreal Economic Institute.

Descoteaux points out is is almost impossible to have any legal recourse in cases of fraud as, once confirmed, transactions are irreversible.

The volatility of the value of Bitcoins, which is not regulated by any central bank, is also an issue. It jumped 50 per cent on Nov. 18 after regulators signalled that digital currencies could be acceptable but plunged 30 per cent on Dec. 5 after China’s central bank banned Bitcoins as currency, according to the online exchange Mt.Gox.

Fans of the currency say that because there’s a finite supply of 21 million Bitcoins, the currency will continue to appreciate.

But, for businesses, the value of transactions could fluctuate greatly before the Bitcoin transactions are transferred into a hard currency, such as Canadian dollars.

Bitcoin was recently listed at $885 on VirtEx, Canada’s virtual exchange to buy and sell Bitcoin.

Descoteaux said businesses are also wary of the tax implications of using Bitcoin, as any sales would have to be declared as income.

The Canada Revenue Agency has said using digital currency must be included in the seller’s income for tax purposes and the amount included would be the value of the good or service in Canadian dollars. It also notes that digital currency can also be bought or sold like a commodity and any resulting gains or losses could be taxable income or capital.

As Bitcoin becomes more popular banks and governments are likely to step in and regulate it, Descoteaux said, and there will be more fees as it becomes mainstream.

Montreal company Bokor Renovation has done one transaction with Bitcoin in the “thousands of dollars” and owner Drazen Bokor is eager for more Bitcoin customers.

“The set up was easy,” said Bokor. “I don’t pay any fees. This is a very fast way to get the money.”

Major Canadian online retailer ClearlyContacts.ca has started to accept Bitcoin as payment for the sale of contact lenses and glasses.

CEO and founder Roger Hardy said his company does business in 20 currencies and Bitcoin is now one more.

While it’s still a niche form of payment, it’s got “global buzz,” Hardy said from Vancouver.

The Bitcoin Alliance of Canada makes pitches to businesses and entrepreneurs about the digital currency. Executive director Anthony Di Iorio doesn’t see any downside for Bitcoin right now.

“The price will just continue to go up as more and more merchants start accepting it,” Di Iorio said from Toronto.