Cryptocurrency is very popular these days, and you might be investing in it now. However, crypto is not, in fact, a currency. For this, and other reasons, you should be highly cautious when being paid in crypto. So what should you know beforehand?
It is a decentralized system, meaning there is no intermediary when a transaction occurs. One example of an intermediary is a bank, which will guarantee that the money you send or receive is indeed doing just that.
It's still a relatively new concept, so scammers everywhere will send you phishing e-mails or hacking attempts.
It's volatile, which means that one day it can be worth one thousand dollars and on the next just a hundred dollars.
Considering all that, would you trust a whole month's salary (or savings)?
Although all of this is true, investing a part of your salary or a small amount of your money in crypto can be an option with good rewards - remember that it is high risk. This article is a starting point for you to dig deeper into what is best for you when it comes to investing, but you can read more about the cons of crypto in this Forbes article: Beware Of Crypto Risks.
Benefits of being paid in cryptocurrency
Given the bureaucracy and legal challenges for companies to operate and move money in specific geographies, cryptocurrency can act as a solution to overcome those barriers, offering more employment opportunities.
Cryptocurrency is a nascent and growing industry that continues to attract a lot of interest and capital. Knowing how different cryptocurrencies function can help position people for new opportunities and potential financial upside.
Risks of being paid in cryptocurrency
Volatility risk: Cryptocurrencies are generally more volatile than world reserve currencies like USD, EUR, and JPY. If you are being paid in cryptocurrency and don't convert it to another fiat currency immediately, you could be subject to these swings in value.
Security and custody risk: There is a learning curve to the custody of your cryptocurrency (i.e., taking it offline into a "hard wallet"). It's another risk of losing your keys or not being able to access your funds. If keeping your crypto on an exchange or in a "soft wallet," you leave your funds at risk of hacks, cyber threats, and the counterparty risk of the exchange itself (e.g., the SBF and FTX fiasco, where the exchange went bankrupt).
Legal risk: Cryptocurrency is illegal in specific geographies, and employees could get into trouble if they accurately report the requisite taxes and other fees.
The on and offboarding risk: Like the custody risk, employees paid in crypto would need access to a reliable way to offboard their crypto to fiat (i.e., exchange your crypto for local currency). There is a learning curve and trust factor here for the local intermediaries that would help with this conversion.
This article is a conversation starter and an introduction to crypto, considering this area is changing and improving all the time.