At a panel discussion held by the Chamber of Digital Commerce in late February, Miami City Mayor Francis Suarez noted that his city’s employees were, like others, concerned about the “possible devaluation of the dollar” and proposed a resolution to the Miami City Commission to “enable our employees to receive a percentage of their salary in Bitcoin if they so choose.”
After all, notes Suarez, “the highest paid player in the National Football League” – Carolina Panther’s offensive tackle against Russell Okung – is going to make the most money not because he’s the best player in the NFL, but “because he asked for 50%. ” his salary in Bitcoin. “
The mayor’s statement may have been a bit of an exaggeration – Oking’s rank as “one of the highest paid NFL players right now” depends on the price of Bitcoin (BTC), as NBC Sports written down End of February. Technically, however Okung is 100% paid in US dollarsThen half is sent to a custodian who converts it to BTC. But on Suarez’s larger point, interest in a “crypto wage alternative” seems to be growing.
If so, it raises some questions: Why take a salary in Bitcoin when there is almost nothing to buy with it? Are there any tax implications that have not yet been clarified? What about the ongoing BTC challenges like volatility and scalability? And if Bitcoin falls 60% or 70%, who wants crypto wages?
In the meantime, it is difficult to find a company outside of Cryptoverse that will pay its employees’ wages in Bitcoin or Altcoins. Thomas Hulme, head of the blockchain and crypto asset team at the law firm Mackrell.Solicitors, told Cointelegraph Magazine: “In my professional life, I have not come across a case in which a company asked for advice on recruiting employees in whole or in part Pay salary. in crypto assets. “
More demand for employees?
Merrick Theobald, Vice President Marketing at BitPay, whose BitPay Send platform has a crypto payroll payment option, told Cointelegraph Magazine: “We are definitely seeing greater demand from employees to get at least part of their salaries in Bitcoin. “This is being driven by the recent surge in BTC prices as well as greater global awareness of cryptocurrency in general. “Bitcoin is fast becoming mainstream and employees are realizing this and want to be a part of it.”
Jack Mallers, CEO of Zap, whose Strike application made it possible to convert part of Russell Okung’s salary into bitcoin, told Cointelegraph Magazine: “We have seen immense demand. We currently have over 5,000 users on our waiting list to convert a percentage of their direct deposit paychecks to Bitcoin here in the US alone. ”
However, it is clear that obstacles must be overcome before crypto wages become the rule rather than the exception. Henry Kim, associate professor at the Schulich School of Business at York University, told Cointelegraph Magazine that the vast majority of companies have no cryptocurrency in their corporate coffers, so the only salaries or allowances paid in, for example, Bitcoin, ” probably “are idiosyncratic desires of talents” – for example, okung.
Paul Brody, global blockchain leader at Ernst & Young, told Cointelegraph Magazine when asked if he expected more companies to offer a cryptocurrency salary option soon:
“I think that’s unlikely. If you think about what makes sense from a risk management perspective, having liabilities like taxes and mortgages in fiat currency (e.g. dollars) and being paid in bitcoin, for example, is a high risk. A mismatch can cause major problems, especially when at a time when cryptocurrencies are depreciating compared to fiat currencies. “
A more fundamental obstacle can simply be corporate convention – i. H. The established payment systems built over generations. Richard Ainsworth, lecturer at Boston University School of Law and co-author of the paper “Payroll Tax Compliance and Blockchain”. tells Cointelegraph Magazine that major payroll companies like ADP still “don’t think about it in a business-simplifying way”.
Getting paid in crypto is inherently problematic, Ainsworth continues. “The income is determined at the time of receipt. However, holding the crypto can create tax issues when cashing in. However, the crypto to fiat currency exchange rates need to be kept minimal – i.e. H. “Subsidized by the employer”.
“It sure will come”
However, Ainsworth believes that one day crypto wages will be the order of the day, although it may take a while, as is the case with many innovative technologies: “It took ARPANET 38 years to become available [a precursor to the Internet] to Skype. It may take this long for the payroll to arrive in Bitcoin, but it will surely come. “
When Ainsworth wrote his paper exactly four years ago, he was looking at crypto wages from a global perspective, with an emphasis on companies with global operations and the transfer of employees from country to country. A scenario that he envisions:
“If I had a mortgage on a house in NY but was stationed in Japan indefinitely and then in London […] I might want my NY mortgage paid off of my salary along with some other expenses, but while I’m in Japan (if the company pays for my apartment there) I might still want some of my salary to be paid in Japanese yen (or later in pounds sterling). Getting paid in crypto would alleviate this difficulty. “
However, this is probably not your typical workers dilemma – think Suarez’s workers in Miami. Hulme told Cointelegraph Magazine that the vast majority of the goods and services normally needed by an employee still cannot be purchased in crypto assets, which means the majority of employees are likely to prefer to pay in fiat currency becomes.
There may also be tax implications in countries where Hulme is based, such as the United States and the United Kingdom, as “this is likely to pose problems from a PAYE standpoint” – in relation to the UK system of collecting income tax and social security payments from employees – “from a practical point of view and from a general tax point of view.”
Risks for employees?
People need to diversify their financial holdings, Brody suggests, and right now the only people likely to charge Bitcoin wages are those who are already invested in crypto. He adds, “Paying all or most of their salaries in a volatile digital asset poses significant risks for employees. The people who are most likely to take up this offer are also the ones who are most likely to suffer hard if it goes wrong: people who already work in the crypto room. “
“I’m a good example,” he continues: “Professionally, I’m“ all in ”with blockchain and digital assets – my work depends entirely on the success of this sector. Throwing all of my other financial assets in the same bucket is very risky and if things go bad I would no longer have a backup plan. “
Of course, there is no need for an employee to have their entire salary drawn in crypto. Okung, for example, will end up with half of his NFL salary in bitcoin and the other 50% in fiat currency. CoinCorner, a UK-based provider of crypto exchanges and wallets, has been offering its employees a crypto salary option since 2019. Although all of the company’s employees are participating, “currently nobody is taking 100% of their salary in Bitcoin,” says Danny Scott CEO of Cointelegraph Magazine.
Still, this may not be the best way to think about the matter, suggests Mallers: “The healthiest mental framework is to think of Bitcoin as your savings account – money to be saved, not spent on everyday life.” How much safe can be assigned to a crypto savings plan is different for each individual. In the meantime, companies “need to prioritize their ability to attract and retain talent,” Mallers told Cointelegraph Magazine, adding:
“Those who deny their employees the convenience of maintaining and managing the highest performing wealth and savings account in human history will have a hard time convincing the world’s most talented people to be employees.”
Theobald adds that employees do not need bank accounts, enjoy benefits such as faster access to finance and “receive the exact amount sent at the prevailing exchange rate”.
How does it work?
The logistics don’t seem that difficult. CoinCorner, for example, has had Bitcoin on its balance sheet for many years, which “made paying salaries in Bitcoin pretty easy,” Scott told Cointelegraph Magazine. The company’s accountant processes everything in British pounds sterling from the accounting and tax side, but then the company converts the required pound amount into BTC when paying the salary. Scott says:
“We take the closing price for the end of the month and use it to calculate the BTC amount. Unfortunately, this part can get more complicated if you didn’t keep Bitcoin on your balance sheet, as you’d have to buy and then use the rate from the time you bought Bitcoin. “
Bitcoin is also not the only crypto option offered by CoinCorner: “We also support Ethereum (ETH) and Litecoin (LTC) – but none of our employees have yet chosen these,” says Scott.
A company using the BitPay Send platform simply deposits fiat into their BitPay merchant account, and BitPay converts the fiat to crypto immediately before fulfilling an employee’s crypto withdrawal request. BitPay also adheres to the fight against money laundering. Office for Foreign Property Control and other global regulatory and compliance requirements, adds Theobald.
A boon for the gig economy?
If a Bitcoin salary option were to become popular, where could it catch first? “The interest in crypto wages is strong worldwide, but we are seeing greater interest in countries where the local fiat currency is very volatile,” says Theobald. Interest from companies with cross-border withdrawals is also particularly high, and this is due in part to the need to make bulk payments to the gig economy and affiliate networks, which have to make withdrawals anywhere in the world every day of the week and to at any time. “
From a freelance perspective, “Online jobs paid in Bitcoin are a fantastic way to get work from anywhere in the world”. Remarks LaborX, a freelance job platform, especially with the availability of fully regulated exchanges and wallet services that securely store crypto.
Brody says that “this is mainly offered in countries where local exchange rates or high inflation make paying in the local fiat currency an even higher risk”. Otherwise, it envisions companies that, with the slightest complication, forego the simplest method of payment – that is, fiat currency.
What if the BTC price goes down?
However, will the demand for Bitcoin-paid salaries go away if the price of BTC falls – or even levels off? Kim suggested that the main reason that employees are asking about BTC wages now is because the price of Bitcoin is rising – but when BTC reaches some price stability, employees may no longer be as interested in getting paid in the cryptocurrency he tells Cointelegraph Magazine.
But when the same question is asked “Absolutely not,” replies Theobald. “We believe the opposite. When and when the price of BTC falls, we believe we’ll see one increase asked because employees who buy Bitcoin primarily as an investment often provide more money for the break-in. “And for the more cautious workers, there are always stable coins, he adds.
What about the scalability issues? In response to Suarez’s February 11 tweet in which he announced that he “explored […] paying employee in Bitcoin, ”a resident of Miami ranswered::
Dear Mayor Suarez;
Bitcoin can process 650,000 transactions per day at best. MDC population 2.7 million
If all MDCs were using Bitcoin, we would be limited to one transaction every four days
– Marc Kwiatkowski (@fbmarc) February 12, 2021
Strike uses the Lightning Network, a secondary system that can speed up Bitcoin transactions. Will a flash or a facsimile of it be required? whether crypto wages should become a reality on a large scale?
It all depends on how a company pays its employees, says CoinCorner’s Scott. If an employer “a [service firm] That provides the tools for salary payments. Then they may also offer Bitcoin wallets for the employees. At this point there are initially no transactions in the chain, which means there are no scaling issues. “
“Of course, when they want to send the chain transactions to employees, scaling comes into play, and Lightning would help. Lightning also has the ability to stream salaries instead of paying them weekly / monthly etc, ”adds Scott:
“In theory, you could stream your portion of the salary to be paid in Bitcoin every 10 seconds over your work day, for example, so that it is effectively paid in real time rather than once a month / week.”
Look far ahead
Will most global companies offer their employees a crypto wage option in five years? “From my point of view, it is doubtful,” said Hulme. For his part, Ainsworth is more optimistic, telling Cointelegraph Magazine, “Five more years should bring some changes, and I think there will be MORE, but maybe not most global companies. “
If BTC calms down enough to allow the company’s salaries to be paid, Kim suggests, “Then it is more likely that the development of the central bank’s digital currency will accelerate.” For his part, Brody believes that “companies will offer their employees the opportunity to invest in crypto and digital assets as part of their normal savings and retirement plans.”
Scott told Cointelegraph Magazine: “I assume that more and more companies will offer payments in Bitcoin over the next five years. ” It’s still early on the adoption curve and there is a lack of up-to-date tools: “But they will improve over time.” Theobald adds that it will be necessary in the future for employers to “enable employees to be paid how and when they want to be paid”.
Mallers sees some sort of inevitability for the process: “The public is starting to treat Bitcoin as their savings account, where excess cash is stored and protected. The natural evolution is to get a percentage of your paycheck in Bitcoin. “