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Is Bitcoin the Key to Real-Time Payroll?

  • By Andrew Deichler
  • Published: 4/28/2015
Many treasury and finance executives would like to pay employees in real time because of its convenience and security. That dream could become a reality, experts say. Problem is, the key to real-time payroll is bitcoin and other virtual currencies.

Last week during a panel session on digital currencies at George Washington University, a panel of payments experts weighed in on bitcoin and real-time payroll. Not surprisingly, bitcoin advocates said the virtual currency holds the key. Equally unsurprisingly, treasury and finance professionals were skeptical.

The optimists

Panelist Eric Piscini, principal, banking and technology, Deloitte Consulting LLP, believes that bitcoin could actually bring real-time payments to ACH system. “That would be the difference,” he said. “We can schedule ACH so that the payment happens when we want it to happen. But if I want to transfer money between you and me right now, it’s not going to be real-time. That’s what bitcoin can bring; real-time transactions.”

Panelist Jerry Brito, executive director of the cryptocurrency research and advocacy group Coin Center, agreed that bitcoin and other cryptocurrencies may be able to make the payroll process even more efficient. “Many people live paycheck to paycheck,” he said. “Bitcoin could take friction out of system and allow for payment on an hourly or daily basis.”

But precisely how this could work is still up in the air, and the panel did not offer any concrete answers.

The skeptics

Magnus Carlsson, AFP’s manager of treasury and payments and a former treasury executive with Volvo, noted that ACH payments already are highly efficient for payroll. “Is there a way you could see virtual currencies coming in and making this better?” he asked. “This is a system that many people say works very well—but does it need improvement?”

Carlsson noted that NACHA is currently developing Same Day ACH for payments, which would shrink the gap with three daily settlement windows. But even that is not actually real-time.

Furthermore, while the idea of paying employees on a daily or even hourly basis might appeal to some businesses, using a highly volatile currency like bitcoin to do so would create headaches for both corporate treasury departments and employees. As panelist Mark T. Williams, executive-in-residence and master lecturer of finance at Boston University, explained, bitcoin’s value can drop 10 to 20 percent in a day.

Williams noted that at bitcoin’s peak in 2013, its value increased by more than 6000 percent. “No currency on this planet had ever gone up that much,” he said. “The bitcoin community looked at that and said, ‘This is evidence that the technology works.’ And then sure enough what happened? Since 2013, it’s dropped by almost 80 percent.”

Carlsson in particular is skeptical that such a solution could actually work. “In a case like that there are several issues. First of all, would an employer be even remotely interested in sending payroll on an hourly basis? Also, If employees were being paid on the hour or by the day using bitcoin, they would need to immediately cash out or run the risk of their payment dropping in value,” he said.

There may be opportunities for real-time payroll within the blockchain and the technology around bitcoin, but the currency itself has to be stabilized first. “There are two components—bitcoin, which is the locomotive, and the rail that moves it from A to B,” Williams said. “That rail is solid. No one is arguing that the technology is not unique. But we have a locomotive that’s not stable. So how stable is that overall system?” Currently, bitcoin is 15 times riskier than the U.S. dollar and seven times riskier than the Argentinian peso.

Regulatory questions

Williams see regulation being a key cog in stabilizing bitcoin. “Bitcoin is barely regulated,” he said. “It’s a nationless currency. If it wasn’t for the state of New York, we would have virtually no regulation of bitcoin, and that’s dangerous.”

Piscini added that even if New York’s regulators crack down on bitcoin that is just one small piece to a much larger puzzle. “You can have regulation in New York, but because it’s a global currency, does that matter?” he asked. “Will New York just become a bitcoin-less state because no one wants to use bitcoin in New York? The challenge is: how do you regulate [bitcoin] on a global basis? I don’t think we have an answer for that.”

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