Many people are looking at new ways of getting paid electronically and getting into some investments at the same time. The latest craze is cryptocurrencies.
Some millennials think this is a way to get back in the game quickly even if they started in low-paying jobs. Others, like small business firms, think it might be a way to add more profits on a job or project, because they can avoid tax liabilities and maybe pay everyone in cryptocurrency as well.
The inception of Bitcoin and the blockchain technology that supports it goes back to 2009. Since then, increasing numbers of people have been considering Bitcoin and all the other "Altcoins" (e.g., Ripple, Ethereum, Bitcoin Cash and about 1,600 more) that are variations on Bitcoin.
There also has been an increase in fraud and people losing their whole investment by some investing in cryptocurrencies. To say the least, it is a volatile area with real scams where people lose real money.
At this time, the whole area of cryptocurrencies is not regulated by any central bank or government. Some say that is a plus. Others say that is exactly what is wrong with the credibility and liquidity of any cryptocurrency. Without backing of any central bank or government, all the coins’ values are not recognized within any legitimate banking or government regulatory framework.
Would you want to get paid in cryptocurrencies instead of a more traditional way?
“Oh, yes! That gets us into the 21st century, real-time transfers of money, electronic wallets, and into the big bucks!”
Some people think it is the shortcut to getting rich quickly. Others have concluded the risk is far too high, and they would not gamble any investment or savings, let alone their whole paycheck or payment, on a large project where the whole payroll could be jeopardized.
Beware of any organization wanting to pay for your work on a large project in cryptocurrencies. You might be sold on the idea of not having to pay taxes and avoiding other costs, but think again. You might be getting paid in the equivalent of Monopoly money when it comes to trying to cash it in for real currency.
Jump on this quick and get rich!
“If we pay you in cryptocurrencies, you can avoid taxes on it and save even more money when you go to pay the project team. Think of all the extra profit you will make saving money at both ends!”
As soon as you hear this on any deal, run away as fast as you can. Get-rich-quick schemes are usually nothing more than that. A scheme to separate you from your hard-earned money.
Plus, you may think you are avoiding taxes, but you’re not. If anything, you have incurred a tax liability that may cost you more in penalties or even jail time. Jobs are hard enough to come by, sell, and complete on time and on budget. Do you want to risk all that hard work and deal in cryptocurrencies that may or may not pay off?
The argument against my caution would be the assertion that blockchain technology is the building block of the future especially on financial transactions and other applications, that it’s the greatest, and that soon everything will be paid in cryptocurrencies and it will be the norm.
Well, it may be “the greatest” eventually, but there is too much room in it for fraud and manipulation today. Avoid the grief.
Plus, there is no regulatory oversight on it today, and you really need that if you are going to look at the coins as legitimate tender to pay for jobs and projects.
In bit we trust? We’re not there—yet!
While blockchain technologies, including the cryptocurrency application of it, have a lot of promise, we need to wait until governments and central banks put their blessing on it. If they don’t, you are dealing in the same currency that gun-runners, dope dealers and others who want their money with no audit trail available on their illegal transactions use.
Put it into that context, would you want to go collect money in an environment like that for the legitimate job and services you provide?
“Hey, I can’t cash this in for real dollars.”
“So sue me. As we agreed, we paid you your price in cryptocoin!”
We need to see a real framework of legitimacy around the blockchain technology supporting cryptocurrencies. Until then, it will be a while before we can safely say, “In bit we trust.”