In the last blog, we talked, about how crypto is shaking up our concept of money, and how today its been accepted as payment Companies like Tesla and Microsoft now accept Bitcoin as a standard means of payment for their products and services. So if you can buy things with crypto, does that mean you can get paid in it?
The short answer is yes. However, like everything in the world, there are pros and cons and in this blog, we are going to talk about them.
Advantages of getting paid in crypto
Getting paid in bitcoin is appealing for many workers because it offers near-instant transfers and low fees.
Cryptocurrency’s most significant benefit is speed: transactions settle almost instantly, compared to traditional SWIFT transactions, which can take days/weeks.
Crypto transactions take place on a peer-to-peer network without an intermediary financial institution. If I send you bitcoin, it goes directly to you. Thanks to the peer-to-peer structure, all bitcoin transactions are permanent, visible, and secure.
Crypto’s peer-to-peer network sidesteps centralized authorities that control the supply of traditional currency, like banks and governments. In other words, crypto’s value is independent of government or financial institutions.
It’s an investment
Unlike traditional fiat payments, crypto has the potential to rise in value. Employees could end up collecting far more than their base salary if the value of crypto appreciates.
Almost nine in ten American adults say they’ve heard of crypto. Many employees, contractors, and freelancers alike now pursue crypto payments. A signing bonus paid in crypto could make for an attractive offer. And flexible payment options like crypto withdrawals might allow the company to stand out from its peers and attract talent.
Disadvantages of cryptocurrency in payroll
If you think getting paid in cryptocurrency sounds like a pretty sweet deal, make sure you’re aware of all the risks and potential downsides
Cryptocurrencies are highly volatile, so the amount you’re paid today could be worth a whole lot less tomorrow. Take bitcoin, for example. On 10/28/17, it was worth $5,769, but by December 18, it had climbed above the $19,000 mark. At the time of this writing (2/13/18), it was hovering around $8,765.
Some critics of getting paid in crypto argue that this approach effectively encourages people to gamble. Due to the highly speculative nature of cryptocurrencies, there’s no way of knowing how much your holdings could be worth in the future.
Cryptocurrencies are still largely unregulated, and legislators around the world are still catching up with the rapid growth of digital currencies. This means there’s always the risk that the value of cryptocurrency holdings, or maybe even their legality in some cases, could be affected by future law changes.
Tax requirements vary
If you get paid in crypto from an overseas source, you should be aware that the tax treatment of cryptocurrencies varies from country to country. Not only do you need to be mindful of how the IRS taxes digital currencies but also how your funds will be taxed in the country where they are earned.
Still not widely accepted
While cryptocurrencies are becoming increasingly publicized, they’re still not widely accepted as a form of payment, so you may need to exchange your cryptos for fiat currency in order to be able to spend the money you’re paid.
Another factor to consider before being paid in crypto or not would be crypto regulations.
Crypto regulations: How is bitcoin regulated?
Bitcoin and other cryptocurrencies are not real money or legal tender in many countries. The exception is El Salvador, which legislated bitcoin as its official currency in September 2021.
Countries with friendly regulation
As with traditional currencies, bitcoin falls under more stringent regulation in crypto-friendly regulatory landscapes, such as the US. The IRS taxed differently than traditional currencies, and it falls under more stringent regulations than fiat currency. The IRS treats bitcoin as property for taxation purposes.
Countries with restrictive regulation
Many countries ban cryptocurrency altogether. As of November 2021, nine countries have an absolute ban on crypto, meaning owning or trading crypto is considered illegal. The nine countries with complete bans are:
42 countries have implicit bans on cryptocurrencies, meaning the government has placed restrictions on banks and financial institutions from dealing with crypto or offering services to crypto providers.
Overall, these broad restrictions currently make it impossible to offer a bitcoin wage on a global scale.
Taxes on cryptocurrency
Cryptocurrencies are taxed differently from country to country. In the European Union, bitcoin is exempt from VAT (value-added tax) in light of a 2015 Court of Justice of the European Union ruling. They consider bitcoin “a supply of services.”
In Israel, bitcoin is a taxable asset. In Switzerland, it’s a foreign currency. Argentina and Spain treat it as income tax, while Denmark treats it as income tax with deductible losses. In the UK, on the other hand, corporations pay corporate tax, unincorporated businesses pay income tax, and individuals pay capital gains tax on crypto profits.
We still have some way to go before crypto salary payments become the norm globally. In the next blog, we’ll take a look at another type of cryptocurrency that aims to mimic the value of the Dollar / Euro or any other fiat currency.
Have you heard of stablecoins? These are crypto tokens that mimic fiat currencies like the US Dollar or the Euro – Read more here
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