Should I Get Paid in Bitcoin?
Bitcoin has surged past the $11,000 mark, successfully navigating the choppy waters thrown up by Donald Trump’s recent stinging tweet attack on Facebook’s proposed Libra coin and all other cryptocurrencies. The President doesn’t like these digital assets, saying that they are ‘not money’, that they facilitate illegal activity, and that they need to be regulated. If such damning words from the Commander in Chief were designed to halt Bitcoin in its tracks, they haven’t worked in the short term.
No matter what your opinions are on Trump, his words (and outbursts) have enormous power to sway popular opinion and market direction. Bitcoin’s resilience to these recent headlines is acting as validation to many who are looking to the future for the currency, including its potential uses in the more traditional financial structure of salary payments to employees.
When dealing with a person’s wages, Bitcoin justifiably comes under additional scrutiny to add to its existing tally. However, the increasing exposure that virtual currencies are receiving, coupled with Bitcoin’s recent market resurgence, is making this an idea worth considering for many people.
We’ve taken a look at the reality of being paid a salary in bitcoin — the pros and cons, as well as those who are leading the way in expanding cryptocurrencies’ use in mainstream economics.
The Current Climate
The option to accept a salary in Bitcoin only became available a few years ago, and was mostly confined to crypto startups offering it to their employees. In 2013, Coinbase only had six employees, and paid all of them in Bitcoin.
More recently, a mixture of high profile individuals and major corporations around the world have made headlines by adopting cryptocurrency payments, thereby bolstering the legitimacy of the practice in the eyes of many. Canadian speed skater Ted-Jan Bloemen accepted his payment at the 2018 Pyeongchang Winter Olympics in Bitcoin, in a sponsorship deal with ONG Social, and virtual reality provider CEEK VR.
Japanese Internet firm GMO Group also announced in December 2017 that they were offering 4,000 employees the option to receive a portion of their salaries in bitcoin. The company had recently expanded into cryptocurrency mining and trading, and commented that the move was important for “nurturing and developing cryptocurrency literacy”.
Dedicated companies have now been set up to cater for the growing interest in partial salary payments via cryptocurrencies. BitWage is a payroll company that allows individuals and companies to send and receive salary portions in Bitcoin and other currencies, with advertised users from major industry names including Airbnb, Uber, Facebook and American Express.
Legal Hurdles
Of course, the above examples are far from representative of a universal reality for Bitcoin. Cryptocurrencies may be gaining traction and achieving recognition, but international financial structures and the regulatory bodies governing them are still scrambling to catch up.
In many cases, the problem is deeply rooted. Depending on the country you’re in, Bitcoin may be illegal to varying degrees. Bitcoin has never been legal in any capacity in Bolivia, for example, while in Ecuador the currency was outlawed in mid-2014 as part of the country’s financial reforms. Many have seen the move as a way of removing competition from the country’s own digital currency system, Sistema de Dinero Electrónico. However, Bitcoin laws aren’t strictly enforced, making it a possibility for some Ecuadorians to use it on a limited scale.
China’s relationship with Bitcoin is more complex, with numerous headlines over the years stating that the country has banned crypto exchanges and made mining illegal. The Chinese government has recognised and protected bitcoin as virtual property since 2013, but does not recognise it (or any other crypto-assets) as currency. While ICOs have been banned in the past in China off the back of crypto scams, in reality, citizens are big traders of Bitcoin and other currencies via locally managed WeChat groups.
For those living in countries where Bitcoin restrictions are less prevalent, there are still key considerations that make a straight switch from fiat to crypto difficult. Like China, the IRS in the US considers Bitcoin property rather than currency, while the Fair Labor Standards Act requires that employers pay their employees “cash or negotiable instruments payable at par.”
The fact that legislation still doesn’t know what to make of cryptocurrencies in many respects makes the prospect of receiving a Bitcoin salary a complex prospect. Let’s take a look at a simplified breakdown of the pros and cons.
Pros
Fast and Borderless
The nature of industry and commerce is truly international today, with an ever-increasing number of employees operating remotely. Bitcoin payments can easily be sent anywhere, with the luxury of not having to deal with international banking, including expensive wire fees, conversion rates, delays and holding periods. Bitcoin transactions do include fees, but these are far easier to manage than those imposed by traditional financial institutions.
Easy Investment
Bitcoin and other digital assets can be seen as an easy way for employees to get involved in the complex world of investments. Rather than navigating complex stock options and investment packages offered by brokers and banks, direct payment in Bitcoin allows an individual to take direct and instantaneous control over their own simplified cryptocurrency portfolio.
Startup Culture
Employers, particularly in the tech startup sphere, are seeing Bitcoin payments as a way of attracting new talent and complementing this with other key perks. Keeping an open mind in terms of accepting crypto in lieu of fiat currency may open doors to some lucrative employment opportunities within certain industries.
Cons
Volatility
It is undeniable that Bitcoin, along with other cryptocurrencies, can be incredibly volatile. The market is famously unpredictable, and anyone accepting Bitcoin for their salary could see the value plummet, as well as skyrocket. There needs to be careful consideration by an individual over what they can afford to lose.
Tax Implications
As highlighted above, this model of salary payment opens up tax questions which, depending on your location, can become quite complex. In the UK, HM Treasury issued guidelines in 2018 which stated that cryptocurrencies received as employment payments are subject to national insurance and income tax, but there are further underlying considerations in other jurisdictions, such as capital gains that must also be factored in.
Few Participating Companies
The notion of Bitcoin salaries may be an appealing one for many individuals, but their employers often don’t share that sentiment. Cryptocurrencies still carry a great deal of stigma in many circles, and the perceived risks and legal implications that come with moving payroll over to this new financial concept.
Taking the plunge and switching to Bitcoin for salary payments is a big step and, in the end, there is no definitive answer that can be applied for every individual. Realistically, the turmoil that surrounds Bitcoin as a form of currency is likely to continue for the foreseeable future, especially with Donald Trump now fixing it in his sights. Interestingly though, his former White House chief strategist Steve Bannon recently countered the president, saying that “cryptocurrencies have a big future.” How this back and forth may progress between the two is anyone’s guess.
