The 2024 run in many types of cryptocurrency is forcing organizational leaders to consider how they can best utilize digital assets to support business growth and operations.
Buoyed in part by the November election of President Donald Trump, bitcoin value rose nearly 150 percent in 2024. Ethereum, the second most frequently held digital currency, rose by nearly 50 percent, which actually underperformed many cryptos based on inflation and declining revenue concerns, according to a December 2024 article in FXStreet. Some analysts predict robust growth for those two cryptocurrencies in 2025, with potential for other significant digital asset increases as well.
With such possible valuation growth, there’s an appetite for some vendors to get paid by bitcoin or other digital assets. Employees also value the potential of digital payments. Meanwhile, businesses can utilize cryptocurrency as part of their monetary portfolio to raise funds for future capital, personnel and other investments.
Businesses should at least be asking themselves the question if they should be utilizing cryptocurrency or stablecoins in some way for their business, said Rob Massey and Seth Connors with Deloitte. Massey is the Global Tax Leader – Blockchain and Digital Assets for Deloitte Tax LLP and Connors is a senior manager with the firm’s Risk and Financial Advisory practice. They say clients in businesses of all sizes are frequently seeking guidance on how to utilize blockchain technology and digital assets.
Most often, these businesses use cryptocurrency as a form of compensation for employees, or as a type of payment for vendors. In that sense it’s a type of working capital but serves as an asset that can be extremely volatile. Massey said the treasurer mindset can become complicated with cryptocurrency because of how often its value can change.
“Its use is growing but businesses need to recognize all the complexities involved,” Massey said.
One such complexity is as an accounts payable function for vendors, cross border payments can be difficult because of the scrutiny of international payment flows. If nothing else, it’s another option for vendor payments.
Cryptocurrency compensation for employees often comes in the form of bonuses, often because of employee demand and preferences, Massey said. One of the
reasons for that demand is that offering bitcoin in particular is trendy and fun, positioning the company as a place where professionals want to work, Massey said.
“It also is a way to engage your employee base in this (cryptocurrency) ecosystem,” Massey said.
However, there are complexities with using cryptocurrencies as a form of employee payment as well, Massey said. Withholding tax can become more complex, for example. Additionally, some states don’t accept cryptocurrency or stablecoin as a form of tax.
Yet more states and municipalities are marketing the fact that they accept cryptocurrency payment for taxes, licenses, fees and other services. Detroit residents will be able to pay taxes and other city fees using cryptocurrency through a secure platform managed by PayPal by summer 2025, city officials announced in November. That will make Detroit the largest U.S. city to accept cryptocurrency payments.
“This new payment platform will increase accessibility for Detroiters who would like to use cryptocurrency; more importantly, the platform upgrade will also make it easier for Detroiters to make electronic payments – including those who may be unbanked,” Detroit City Treasurer Nikhil Pate said in November.
Municipalities are not the only organizations accepting payment for services. Such retail luxury brands as LVMH and watch labels Hublot and Tag Heuer and fashion brands like Gucci have offered some crypto payment options. But with bitcoin and other digital assets soaring in value, other businesses are open to the idea as well.
Cruise company Virgin Voyages recently began offering bitcoin as a payment option for its annual pass that allows travelers to hop onto any ship, anytime, for a full calendar year. The cost is $120,000, which would equate to a little over one bitcoin as of January 2.
Several NFL players have taken some of their salary or bonuses or endorsement money in bitcoin as well, including Saquon Barkley of the Philadelphia Eagles, Odell Beckham, Jr., Trevor Lawrence and more.
Numerous companies have publicly embraced digital assets. Fidelity Investments offers bitcoin investment options for retirement plans, including 401(k)s. Many state pension funds in the U.S. are currently exploring crypto investments. A December 16 Associated Press article indicated that with the backing of the Trump Administration, more states could be open to utilizing crypto, including use in public pension funds and state treasuries.
Benefits and challenges with paying employees with crypto
Another benefit of paying employees using cryptocurrency is that it can allow for more frequent payment streams, compared with the standard every two week schedule most businesses are on. A more frequent compensatory payment schedule fits well with employees who operate in the gig economy, and it expands the potential payment channels available.
“(Employees) can get pretty excited about real-time payment systems compared to the standard legacy systems we have been dealing with for years,” Massey said.
Yet some businesses are hesitant to move toward cryptocurrency because of how it is stored. The element of account protection and security is a concern unless businesses choose a third-party vendor like Coinbase or another exchange to safeguard their assets, said Connors. But there have been multiple examples of cryptocurrency exchanges failing, costing consumers billions of dollars.
The best-known example was the bankruptcy of FTX, a Bahamas-based exchange that collapsed in late 2022, causing the estimated loss of $8 billion in customer accounts, a resulting in the company’s bankruptcy and prosecution of its founder Sam Bankman-Fried.
Additionally, employers may have to help employees set up their own individual accounts with such a site. Companies and individuals can choose to self-custody their digital assets as well, but that can get expensive and requires hardware assets that can result in other security concerns.
“There’s risk there because your house where the hardware is stored could have a fire. Or the hard drive could break,” Connors said. “The tradeoff is whether you want to trust a third party. When you are paying employees or vendors, who bears that risk? The law is a little unclear.”
Investing in bitcoin
There is a growing list of businesses and other organizations that are choosing to hold onto cryptocurrency as part of their portfolios, said William Kraus, partner and chair of the Fintech and Blockchain practice at tech-focused global law firm Pierson Ferdinand LLP.
Those organizations that consider it an investment have to hold it on their balance sheet, which can be risky. Kraus mentioned that endowments and pension funds are two of the non-business entities he sees are adding cryptocurrency exposure.
Such exposure can be profitable, as evidenced by MicroStrategy, a cloud software company that reportedly holds 440,000 bitcoins on its balance sheet, following an initial $425 million investment in 2020. Other companies followed, including payments processor Block and electric vehicle OEM Tesla. However, this level of exposure is an outlier, even if organizations see value in digital assets despite the volatility.
“Using blockchain technology is appealing in many ways,” Kraus said. “Transactions can settle in seconds or minutes. It allows for a secure ledger and countless applications.”
For example. JP Morgan Chase has created a JPM Coin, a dollar-backed stablecoin used as a way to settle transactions and provide an institution-to-institution service. As of late 2023, JPM Coin was averaging daily transaction volumes above $1 billion, according to Fortune magazine.
One concern with adding cryptocurrency to a business’ investment portfolio is the extreme volatility it brings. As a result, the investment option is not a decision that C-Suite executives should make in a bubble, Massey said. Investment decisions should be made in conjunction with a company’s treasury department, accounting, its board, operations, sales and more.
“It’s a common topic among (corporate) boards to discuss whether they should diversify their treasury to include digital assets,” Massey said.
Connors believes that companies should discuss cryptocurrency investments with heightened collaboration. Some companies have proactively decided to hold digital assets as a defense mechanism against hackers that could hold them hostage if hackers access private financial networks. Such hackers often attempt to hold companies hostage by hacking into and gaining access over their IT systems. They will then demand cryptocurrency as payment to give the company access back to its systems, essentially holding it hostage.
“In this scenario, companies may not have the time to get digital assets like bitcoin in their wallet to pay off bad actors,” Connors said. “Ideally you want to get law enforcement involved but (a resolution) can take some time and companies may feel they can’t wait.”
Employer responsibilities, including accepting payment for goods and services
Massey said businesses may bear some responsibility to help educate its employees about cryptocurrency if it offers payment through such digital assets. He suggests that employers provide such context on the complexities of digital assets, including a basic primer of digital currency.
Companies may also want to educate their teams about asset protection strategies, bookkeeping and more. Tax liabilities are also an issue that employees may want to discuss with an accountant as IRS and U.S. Treasury regulations have recently updated related to cryptocurrency.
“As an employer you really want to have a responsible mindset,” Massey said. “It can be tricky because the value of (that employee payment) one day may be a lot different than it will be in a couple of weeks.”
A growing number of retailers allow cryptocurrency, most frequently bitcoin, as a method of payment for goods and services. Overstock.com is one of the most notable businesses to go in this direction. There’s an ease-of-use benefit like Apple Pay that is appealing to some consumers, Kraus said. Yet there are state and federal regulations to consider.
A small payment under $100 using bitcoin is different than a six-figure payment for a piece of capital equipment, Kraus added. Companies accepting cryptocurrency for large payments need to be aware of such threats as money laundering and terrorism-related organizations that may prefer to pay with digital assets because it can be harder to track.
“You’ll want to be careful with large transactions, especially from a foreign sender,” Kraus said. “It doesn’t matter too much if you’re paying for an item less than $10 but there can be a regulatory and compliance burden to consider.
Vendor payments
Businesses can legally pay vendors or employees with cryptocurrency in most cases, but the decision of whether it is advisable is highly dependent on the beneficiary. “There will be different obligations, rules and regulations depending on where the (digital asset payment) is going,” Kraus said. Some gray areas remain for how these rules should be applied, he added.
Kraus warns organizations about sending a digital asset payment to an unsanctioned entity. Even if safeguards are in place, such payments are not a risk-free transaction, he added. Some organizations even hold onto digital specifically to have immediately payment in case of a ransomware situation that is impacting a company’s network or other proprietary assets. Kraus suggests contacting law enforcement, but he recognizes why some businesses may feel that waiting for a law enforcement resolution isn’t a practical option if its operations, which could include IT systems, are critically harmed.
“Keeping cryptocurrency at the ready is not uncommon,” Kraus said.
“If you’re going to use bitcoin as payment, you need to understand why you want to use digital assets,” Kraus said. “Define the objective and the goal because it’s a volatile, prospective asset.”
Above anything else, now is a good time for businesses to have internal conversations about their cryptocurrency strategy, Massey said. It provides a platform for leaders who are excited about the direction of a company, but the many complexities should be researched and considered.
“In our experience people always underestimate the impact of these complexities,” Massey said. “But as a company, just talking about it is good. Decide whether it’s a good strategy depending on where your business is going.”
