Digital currencies are being increasingly adopted across the world, and their performance has been pretty impressive to date. Individuals are investing in digital currencies, and trade in digital currencies is currently seeing an upsurge. Companies are also pivoting towards virtual currencies to diversify their trade options and deliberating to pay in virtual currencies.
They have already become a famous alternative to legal tenders and fiat currencies, and countries like El Salvador are giving legal tender status to Bitcoins to promote and encourage adoption, trade, and investment in bitcoins. While the fame of digital currencies is increasing day by day, another trend is that they are being adopted as payouts and companies are choosing to pay in virtual currencies, and employees are also readily accepting. In this backdrop, let us look and analyze what are the pros and cons of paying salaries in digital currencies.
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Advantages of paying salaries in digital currencies:
1. No limitations
In the backdrop of Covid-19, companies, and employees are opting to work remotely. The distance between the workplace and employees increased. This made it hard to pay salaries in case the employee is in another country or destination where the legal tender of one country is not accepted in the destination country. But, paying in digital currencies eliminates this limitation as they are accepted worldwide. It is simple to both pay and receive a salary in the case of the global workforce.
Do you wait for your salary to get credited into your account for the initial 10 or 15 days? This is no more the case if the salaries are paid in digital currencies. Virtual currencies are lauded for their speed of transaction, and this comes to the rescue of both companies and employees, mitigating the time spent on manual bank transactions. A lot of time is saved in the case of digital currencies, as digital currencies are 96% faster as compared to manual bank transactions.
3. Low cost
Companies or employers often opt for PayPal for salary payouts in case the employees are in another country. But, transaction intermediaries like Paypal charge excessive amounts for conversion and transaction. Payouts in digital currencies save a lot of extra cost on both sides as it doesn’t cost any excessive charge for transactions throughout the world.
Most of the digital currencies work on blockchain technology, which means that the chain of transactions is saved in the public ledger that warrants transparency of transactions. This also means you can check anytime if your employees received their pay or not. And you don’t have to fear the loss of documents about your employees’ payout data. It always stays in the public ledger. Thus, you can revisit anytime you want.
Disadvantages of paying salaries in digital currencies:
Digital currencies and cryptocurrencies like Bitcoin are extremely volatile in nature, and it’s a known fact. Ethereum and bitcoins fluctuate between 30 and 15% within a single session. Hence, predictability of the value of bitcoin is entirely a mind-boggling process. While this volatility is an advantage for traders, payers and payees may find it less advantageous.
2. Not universally accepted
At least in the current global situation, virtual currencies are not universally accepted yet. Hence, that leaves us with the question, “How to spend them on goods and services in places where they are not yet recognized and accepted?” Although it’s a lucrative choice for investment and trading, it may be a problem for someone who wishes to use it as a legal tender.
Although payment in cryptocurrencies has numerous advantages, some people may be reluctant, hesitant, and skeptical for no certain reason. For example, non-programmers and people with zero knowledge of digital currency may find it hard to adapt to the new method of payment and may thus be inclined to conventional payment methods. Even though digital currency trading and investments are booming like never before, the majority of the transactions are happening only between some elite people, which serves as evidence that not everyone is still habituated to the virtual currency ecosystem.
4. Illegal activities
Along with their volatility, digital currencies are very easy to manipulate and hide as well. This has the potential to persuade or cheat gullible people who don’t know the functionality of bitcoins or other digital currencies into illegal activities. But, mere manipulation doesn’t make virtual currencies “illegal.” It is just one weak point that ill-intentioned people can exploit.
Digital currencies are here for quite a time now. With increasing globalization, digital penetration, and increased users in digital and online transactions, the demand and craze of virtual currencies spread across the globe like a wildfire. While they know no bounds, are highly valuable in nature, and come with no excessive transaction or conversion fees, gullible and unaware people find it hard to use and get habituated to it.
However, big tech companies like Twitter are already implementing it, although not on a large scale. Companies like Facebook, Instagram, and Whatsapp may also follow suit as Facebook recently announced that it is deliberating on launching its own customized cryptocurrency. If everything goes as per expectations, Facebook may soon launch and pay in its own cryptocurrency that may encourage other companies to take the lead.