With cryptocurrencies now more popular than ever, even businesses are getting involved with digital assets.
While some companies are investing in digital assets like cryptocurrencies and NFTs, more and more businesses are considering whether or not they should start paying their employees in crypto.
While there are some benefits to doing so, there are also some risks and challenges that need to be considered. In this article, we’ll take a look at both the pros and cons of paying employees in cryptocurrency.
1. Increased Efficiency
Cryptocurrency has several advantages over traditional fiat currency. For one, it’s much more efficient and cost-effective to send and receive payments in crypto. Traditional methods of paying employees, such as using bank transfers or paper checks, can be slow and cumbersome. In contrast, paying employees in crypto can be much faster and easier because cryptocurrency transactions are usually processed instantly on the blockchain.
2. Lower Fees
Another advantage of paying employees in cryptocurrency is that it can help to reduce the costs associated with payroll. With traditional methods like wire transfers, you often have to pay high fees just to send or receive money with the various digital money transfer services available. With cryptocurrency, there are usually very low or even no fees involved. This makes it much easier and cheaper to make international payments.
3. Multiple Cryptocurrency Options
Using cryptocurrency to pay employees comes with multiple options available. In the past, there was only one major cryptocurrency that traders and investors could use – Bitcoin. But today, there are dozens of different options available, each with its unique benefits and drawbacks. Among the popular cryptocurrencies are Ethereum, Litecoin, Bitcoin Cash, and more. This gives businesses a lot of flexibility when it comes to choosing the right cryptocurrency for their needs.
4. Employee Autonomy
One of the most appealing aspects of paying employees in cryptocurrency is that it gives employees a lot more autonomy over their finances. With traditional payment methods, employees have very little control over when they receive their wages. This can often lead to delays which can be frustrating for employees.
Paying employees in cryptocurrency gives them a lot more control. They can choose to receive their payments immediately, or they can wait until the value of the cryptocurrency has increased before converting it into fiat currency. This flexibility can be very appealing to employees.
5. Greater Security
Cryptocurrency transactions offer better security than traditional bank transfers which are often susceptible to fraud and theft. This is because crypto payments use blockchain technology. Each transaction is verified and recorded on the blockchain, making it nearly impossible to tamper with.
This can give businesses and employees peace of mind knowing that their payments are secure. You can also use a variety of security measures to protect your funds. For instance, using a crypto wallet is a great option for security. Plus, if an employee loses their cryptocurrency, they can usually still recover their funds as long as they have their private key.
6. Access to a Global Workforce
By using cryptocurrency to pay their employees, businesses will have wider access to a global workforce. Many freelancers and contractors now prefer to be paid in crypto, as it offers them more flexibility and freedom. The limited costs and fast transaction times also make it a very attractive option. As a result, businesses that pay their employees in crypto can tap into a worldwide pool of talent.
One of the main challenges of paying employees in cryptocurrency is the volatility of the market. The value of crypto can fluctuate dramatically, which can make it difficult to know how much to pay employees. For instance, the value of Bitcoin in October 2021 was at an all-time high of more than $61,000. But by the end of September 2022, it was only valued at a little over $19,500.
So if you were to pay an employee in Bitcoin today, and the price of Bitcoin fell tomorrow, then your employee would effectively be paid less. This could bring businesses a few complications especially if the type of cryptocurrency is not as valuable as Bitcoin. Without a fixed value, employees can either be underpaid or overpaid. Additionally, businesses will face consequences if the value of the cryptocurrency falls below the minimum wage or the employee’s contract.
2. Limited Acceptance
Another challenge is that it can be difficult to find businesses that accept crypto payments. While the number of businesses accepting crypto is increasing, it is still relatively small compared to traditional methods of payment. This can make it difficult for employees to spend their earnings if they don’t convert their crypto to fiat currency.
3. Lack of Regulation
Cryptocurrency is not currently regulated by any government or financial institution. The US government has made a few steps in the direction of regulating cryptocurrencies, but this is still in the early stages of framework building. Full-scale regulation is not expected to be implemented soon. This means that there is no protection for businesses or employees if something goes wrong in the crypto market.
4. Limited Supply
The supply of some cryptocurrencies is limited. For instance, there will only be 21 million Bitcoin that will ever be created. This limited Bitcoin supply adds to its value but it could also make it difficult for businesses to find enough coins to pay all of their employees. Plus, with many investors and traders gaining more interest in cryptocurrencies, the price could continue to increase, making it even more difficult to find affordable coins.
5. Reputational Risk
Finally, one of the biggest risks of paying employees in cryptocurrency is reputational. Cryptocurrency is still relatively new, and there is a lot of misinformation out there. As a result, businesses that pay their employees in crypto could be seen as taking a risky stance, which could damage their reputation.
Additionally, concerns have been raised about the environmental impact of cryptocurrency mining. As the world moves towards a low-carbon future, paying employees in crypto could become difficult to justify.
The Bottom Line
Paying employees in cryptocurrency can offer some benefits, but some challenges need to be considered. Businesses should weigh up the pros and cons carefully before deciding whether or not to pay their employees in crypto.
If you do decide on using crypto for payment, be sure to ensure secure payment by having a cybersecurity checklist. Ultimately, the decision to use crypto will come down to the specific needs and resources of your business.
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