Unblocking the Concept of Block Chain

March 23, 2022
Inside HR
Wage & Hour
Compensation Planning
Read time: 3 mins

Pardon me, but my age is showing. I’ve been blissfully resisting learning about and happily remaining ignorant about this thing called cryptocurrency. For some reason, my brain understands (and I have a clear comfort level with) “money” that I can’t touch or handle when in the form of credit cards, checks, etc. and stocks and bonds that are tied to something I’m familiar with. The concept of cryptocurrency--money that only exists in the ether--makes me uncomfortable. There are so many things to know about it. Who controls it? What in the world is “block chain”? What do you do if someone electronically makes off with your cryptocurrency? How do you cash out?

Cryptocurrency Bitcoin

I was shocked to learn that just one bitcoin is valued at over $42,000 as of this writing! You don’t have to be a gazillionaire to purchase it, and it can be purchased as a fractional portion for as little as $1. The list of places where it can be used for purchases is constantly growing and now encompasses everything from candy to real estate. I also learned that it can be an investment with high returns--albeit with the associated high risks. Unlike traditional banks and savings and loans, there is no federal insurer for these funds, and it is the wild west of investing with few, if any, regulations in place. For some, that might be the attraction.

Recent HR-related articles have addressed questions about employees requesting to be paid in cryptocurrency. A February 23, 2022 “Dear Littler” article addressed the question of payment of wages in cryptocurrency and cautioned that, under the FLSA, wages must be paid “in cash or negotiable instruments payable at par” (29 C.F.R. §531.27). It should also be pointed out that several states require wages be paid in cash or a negotiable form of U.S. currency. As cryptocurrency is neither cash nor a negotiable instrument in the United States and is not backed by the government or other legal entity, the use of cryptocurrency for base wages (hourly or salary) is not recommended.

As the notoriety of cryptocurrency increases, the question of its inclusion as part of 401(k) investments has arisen. The Department of Labor’s Employee Benefits Security Administration recently issued Compliance Assistance Release No. 2022-01 to caution plan fiduciaries to exercise extreme care before considering whether to include investment options like cryptocurrency as part of a 401(k) plan's investment menu, indicating it may cause significant risks of losses for retirement security.

Although attorneys warn against moving toward full use of cryptocurrency for more traditional HR functions like payroll and benefits, I can’t help but wonder if it is time to be prepared to respond to questions on this topic from candidates or employees. It doesn’t appear that the concept will go away and may even become more mainstream in the employment realm. The learning curve over the past 2 years looks more like a winding country road for HR, and I can’t help but wonder if this is another turn or just something we see as we pass by.