With cryptocurrencies gaining popularity, some corporations have started offering their employees the option to receive their salary and other benefits partly or fully in bitcoin, ether, or other digital currencies.
While being paid in cryptocurrency has its benefits as it eliminates the need to deal with a bank, enabling instant clearance of payments, easier fund transfers, among other things, there are also risks involved. The constant price fluctuation of crypto tokens is a key risk. The prices are so volatile, the amount of money you hold will fluctuate with the token.
Let's take an example: Suppose you have opted to receive your salary in bitcoins. But right after you received the salary at the end of the month, bitcoin plunged by 21 percent. If you had bitcoins worth Rs 100,000 before the dip, then you would have seen a loss of Rs 21,000 in a single day.
Proponents of crypto argue that while the prices of crypto can drop, they can also catapult to higher levels, leading to workers getting more money than they would get from any raise or bonuses.
While the increase in token price would undoubtedly be good for workers, crypto is a speculative market. You cannot predict that the prices will go up, and a substantial drop in prices can happen as easily as rises.
The overall trend for cryptos like bitcoin shows an upward climb when considering a more extended period. But it is highly volatile in short periods. Bitcoin saw a substantial spike of 80 percent in February, then fell by 20 percent within the week, before rising again by 30 percent two weeks later.
This poses the question of what if there was a significant price change between the last day of your work period and the day you receive your salary?
If the price goes up, you will see significant profits from your crypto holdings, but you will incur a heavy loss if the price goes down.
There is also the question of what crypto token are you getting paid with? All tokens do not see the same fluctuations. Your company can lock you in with a specific token that can take an unexpected turn compared to its market peers. This could create discrepancies within the company if employees have different tokens locked in their contracts.
The problem of taxation
Taxation is also a major hurdle for crypto salaries. The taxation rules for crypto assets differ in every country. In India, there is no law so far, and therefore, the income earned in crypto can be interpreted in various ways making taxation complicated.
Besides, there will be a difference between the token’s price when the employer buys it and the price of the token when it is disbursed to the employee. The employee must know the date when the coin was disbursed to him and the price of the coin at that time.
(Edited by : Jomy Jos Pullokaran)
First Published: IST