A small but growing number of employees are asking for cryptocurrency as a form of compensation.

In recent years, more consumers, merchants, and financial institutions have accepted cryptocurrency as a form of payment for everyday products and services. And a small but growing number of employees are asking for cryptocurrency as a form of compensation. Whether a substitute for wages or as part of an incentive package, offering cryptocurrency as compensation has become a way for some companies to differentiate themselves from others.  But why paying employees in cryptocurrency is a risky bet

Volatility

In the same way that cryptocurrencies have the potential to rise suddenly and rapidly in value, they can also fall, leaving payments to employees quickly worth less than they might have expected. If crypto is used for base salary payments, this could leave staff seriously underfunded without warning. Even bitcoin, one of the most popular cryptocurrencies, is not immune from wild price fluctuations — it has fallen sharply since November, tumbling more than 40% from a record high of about US$69,000.

Reputation and acceptance

The decentralization and lack of government oversight around cryptocurrencies make them very attractive to financial scammers, money launderers, and other criminals. This association then gives cryptocurrencies themselves a poor reputation and risk profile, which makes both businesses and consumers wary of the cryptocurrencies themselves, and less likely to accept them.

Compliance

To pay employees in cryptocurrency, you must first check that this complies with the law in the country you operate in. Law around cryptocurrencies and their use vary widely, as does the terminology used to describe or define them (e.g. "digital currencies", "payment tokens" and "virtual assets" might all refer to the same thing in different places). This inconsistency in rules and terminology can be a serious barrier to setting up global cryptocurrency payroll services and ensuring that wage or salary payments comply with local legal and tax requirements.

Fragmented and inconsistent global economic integration

The lack of integration of cryptocurrencies with established banking and finance systems is a major logistical challenge, including for paying staff in crypto. Most banks and major companies don't yet recognize cryptocurrencies and offer no means to tie Bitcoin or other payments to legal flows of money for goods or services. In some countries, cryptocurrencies definitely fall outside the criteria to be considered real money or legal tender.

Cybersecurity threats remain

Cybercriminals can hack into cryptocurrency trading platforms and steal funds. Crypto currency is already the most preferred form of exchange in cases of ransomware attacks. Ransomware incidents usually have a common thread. Cybercriminals can hide their true identities when asking for ransom in digital currencies.

There's a Learning Curve and a Tech Curve

Cryptocurrency isn't regulated by the Securities and Exchange Commission, it isn't traded on the stock market, it can't be bought or sold directly in ETFs, and isn't traded on standard currency exchanges. In order to receive payment in cryptocurrency, you'll have to open an account and a digital wallet on a special exchange. It's not hard to launch on a service like Coinbase Commerce, but it is unfamiliar to most.

Disclaimer: The information posted in the article is for educational purposes only. By using this, you agree that the information does not constitute any investment or financial advice. Do conduct your own research and reach out to financial advisors before making any investment decisions.