It’s no longer news that a large percentage of income earners want to live a wealthy life someday or at least be able to afford whatever they want. To achieve this, they may have to invest a portion of their income in vehicles that could yield a considerable return on investment in the long run.
Individuals who fail to take advantage of these investment vehicles tend to miss out on opportunities to increase their financial standing. When most people think about investing, they usually refer to mutual funds, real estate investment trusts, stocks, bonds, or exchange-traded funds (ETFs).
However, the existence of blockchain technology has paved the way for more investment options in the real world. Now, employees can channel their funds into cryptocurrencies, tokenized assets, NFTs, and DeFi projects.
Also, employers can provide these options to their subordinates as they offer more profit potential and give room for investing without paying any fees to intermediaries. Here are some new-age investment options for employers to consider:
There are no laws that specify the types of investment options that employees can include in their 401k. But the usual options employers offer include stocks, bonds, mutual funds, and ETFs, which are considered low risk. However, a 401k provider, ForUsAll Inc., unlocked a quest for both employers and employees after announcing the inclusion of crypto in the 401k offerings in June 2021.
The company partnered with Coinbase Global Inc. to allow existing clients to invest up to 5% of their 401k contributions in cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and so forth. While many employers see this move as a welcome development, others have been raising concerns owing to the risks of crypto investments.
Even with these risks – which can be properly managed -, Crypto 401k still offers many benefits. The first is the tax advantages that employees will enjoy. Choosing the crypto 401k option allows individuals to enjoy tax incentives regardless of whether they use a Roth 401k or tax-deferred 401k. This means that employees can invest in crypto assets without worrying about the hassles of tracking trades to calculate taxes incurred from buying and selling.
Also, employers who offer crypto investments in their 401k options have a better chance of attracting young and vibrant talents. This is because the younger generation of talents has interests in cryptocurrency; therefore, they may likely want to have some digital assets in their retirement portfolio. As a result, employers who toe this line may have a competitive advantage with regard to attracting and retaining talents.
Using Tokenized Assets To Compensate Key Employees
Before now, the use of stock options to reward key employees has been a common practice by numerous companies. These stock options come with a vesting period ranging from five to ten years to ensure that the employee stays with the company.
This also means that if an employee decides to leave before the maturity of the vesting period, they cannot cash in the stocks. Notable companies have leveraged this compensation method over the years to retain their talents.
With the explosive growth of cryptocurrencies in the past decade, employers are tapping into the industry to use tokens as a compensation tool. Employees prefer this option because cryptocurrencies stand a better chance of significantly increasing in value.
Plus, offering tokens as compensation does not decrease the company’s capitalization value while still applying the vesting period. And since cryptocurrencies grow exponentially, employees will likely see it as enough incentive to stay with the company.
Adopting NFTs As A Vehicle To Enhance Employee Participation
Employees have welcomed digital assets as investment vehicles, driving them to become more productive. However, offering unique and valuable incentives can increase their motivation, which is where NFTs come in. Non-fungible tokens are unique blockchain-based assets that can be exchanged for money in marketplaces. Given the uniqueness of NFTs, they tend to be more valuable than numerous cryptocurrencies.
Therefore, employers can offer this as an investment vehicle for outstanding employees. They can mint new ones that incorporate their values, culture, and brand message or purchase from NFT marketplaces. Also, since Crypto 401k has been receiving wide adoption, employers can introduce NFTs as well. Though NFTs are usually expensive, employees can pull funds together to purchase them wholly or in fragments just like they do in mutual funds.
Paying Salaries In Crypto
It is only expected that with everything going on with digital currencies, more companies across industries will want to take advantage of the enormous benefits of paying salaries with cryptocurrency. Many companies in recent times, especially those in tech, have already made the switch to pay monthly remunerations in cryptocurrency.
While there are downsides to this – which are mostly about price volatility – it has some benefits that will appeal to both employers and employees.
The first is an increased earning potential. Since one isn’t bound to convert all their crypto once they receive it, they have a good chance of increasing their earnings. This can be done by simply converting to cash when the exchange rate is favorable or using Defi applications to earn a fixed return on their crypto assets.
When income earners have cash lying around in their bank accounts, it’s easy to make avoidable expenses. However, since they have to convert their assets to fiat before spending, extravagant spending can be reduced significantly.
Transactions on the blockchain often have cheaper fees than traditional financial institutions or remittance services. Since there are no middlemen, fees are kept low. Also, there is no such thing as salary delay as experienced with banks. This is because payments over the blockchain can be up to 96% faster than traditional wire transfers.
With cryptocurrencies, there are no boundaries. If the recipient has to travel to another location, they can simply convert to any currency. This is also useful if the job is remote and the employee is in a different location. They can get paid in cryptocurrency, which can be converted to any preferred currency. Additionally, this removes the limitation to the array of talents a company can attract as there are no barriers to payment structure.
Cryptocurrencies are gradually entering the normal work environment, providing employers and their subordinates more options for payments, remittances, and investments. Companies that adopt this trend will have an edge in the long run as the younger generation is more interested in crypto than fiat. Therefore, they can attract talents with mouth-watering crypto-related incentives and keep them for a long period.