{"id":6875,"date":"2021-03-13T08:32:35","date_gmt":"2021-03-13T13:32:35","guid":{"rendered":"https:\/\/cointelegraph.com\/magazine\/?p=6875"},"modified":"2021-03-24T14:33:30","modified_gmt":"2021-03-24T18:33:30","slug":"bitcoin-payday-crypto-to-revolutionize-job-wages-or-not","status":"publish","type":"post","link":"https:\/\/cointelegraph.com\/magazine\/2021\/03\/13\/bitcoin-payday-crypto-to-revolutionize-job-wages-or-not","title":{"rendered":"Bitcoin payday? Crypto to revolutionize job wages… or not"},"content":{"rendered":"

Speaking at a Chamber of Digital Commerce panel discussion in late February, City of Miami Mayor Francis Suarez noted<\/a> that his city\u2019s employees, like others, are worried about the \u201cpotential devaluation of the dollar,\u201d so he proposed to the Miami City Commission a resolution to allow \u201cour employees to take a percentage of their salaries in Bitcoin if they so desired.\u201d<\/strong><\/p>\n

After all, notes Suarez, \u201cThe highest-paid player in the National Football League\u201d \u2014 Carolina Panthers offensive tackle Russell Okung \u2014 won\u2019t be earning the most because he\u2019s the best player in the NFL but \u201cbecause he asked for 50% of his salary in Bitcoin.\u201d<\/span><\/p>\n

The mayor\u2019s statement may have been a small bit exaggerated \u2014 Okung\u2019s ranking as \u201cone of the highest-salaried NFL players at this moment\u201d depends on the price of Bitcoin<\/span>, as NBC Sports <\/span>noted<\/span><\/a> in late February. Technically though, <\/span>Okung gets paid 100% in U.S. dollars<\/span><\/a>, then half is sent to a custody provider that converts it to BTC. But to Suarez\u2019s larger point, interest in a \u201ccrypto wage alternative\u201d seems to be growing.<\/span><\/p>\n

If so, it raises some questions: <\/span>Why take a salary in Bitcoin when there is almost nothing that you can buy with it? Aren\u2019t there tax implications that still haven\u2019t been sorted out? What about ongoing BTC challenges like volatility and scalability? And if Bitcoin drops 60% or 70%, who is going to want crypto wages then?<\/span><\/i><\/p>\n

Meanwhile, one is hard-pressed to find any company outside the cryptoverse that is paying its employees\u2019 wages in Bitcoin or altcoins. As Thomas Hulme, head of the blockchain and crypto-asset team at law firm Mackrell.Solicitors, tells Cointelegraph Magazine: \u201cI have not come across an instance professionally where a company has sought advice to pay employees a salary in whole or in part, in crypto assets.\u201d<\/span><\/p>\n

More employee demand?<\/span><\/h4>\n

Still, as Merrick Theobald, vice president of marketing at BitPay \u2014 whose BitPay Send platform has a crypto payroll payment option \u2014 tells Cointelegraph Magazine: \u201cWe are most definitely seeing greater demand from employees to take at least a portion of their salary in Bitcoin.\u201d It\u2019s being driven by the recent surge in BTC prices, he continues, in addition to greater global awareness regarding cryptocurrency generally. \u201cBitcoin is quickly becoming more mainstream and employees recognize this and want to be a part of this.\u201d<\/span><\/p>\n

Jack Mallers, CEO of Zap \u2014 whose Strike application enabled a portion of Russell Okung\u2019s salary to be converted into Bitcoin \u2014 tells Cointelegraph Magazine: \u201cWe have seen an immense amount of demand. We currently have over 5,000 users on our waitlist to convert a percentage of their direct deposit paychecks into Bitcoin here in the U.S. alone.\u201d\u00a0<\/span><\/p>\n

But clearly, obstacles need to be overcome before crypto wages become the rule rather than the exception. Henry Kim, an associate professor at York University\u2019s Schulich School of Business, tells Cointelegraph Magazine that the vast majority of companies don\u2019t have cryptocurrency in their corporate treasuries, so the only salaries or compensation to be paid in Bitcoin, say, are \u201clikely to be idiosyncratic requests from talent\u201d \u2014 Okung, for instance.<\/span><\/p>\n

Paul Brody, global blockchain leader at Ernst & Young, when asked if he expects more companies to offer a cryptocurrency salary option soon, opines to Cointelegraph Magazine:\u00a0<\/span><\/p>\n

\u201cI think it is unlikely. If you think about what makes sense from a risk management standpoint, having liabilities like your taxes and mortgage in fiat currency \u2014 dollars, for example \u2014 and getting paid in Bitcoin, for example, is a high risk proposition. A mismatch could lead to big problems, especially if you have a period where cryptocurrencies go down in value relative to fiat currencies.\u201d<\/span><\/p><\/blockquote>\n

A more fundamental barrier may simply be corporate convention \u2014 i.e., the incumbent payment systems that have been built up over generations. <\/span>Richard Ainsworth, an adjunct instructor at Boston University School of Law and co-author of the paper \u201cPayroll Tax Compliance and Blockchain,\u201d <\/span>tells Cointelegraph Magazine that the major payroll companies, like ADP, are still \u201cnot thinking about this in a business simplification way.\u201d<\/span><\/p>\n

There is nothing inherently problematic about getting paid in crypto, continues Ainsworth. \u201cIncome will be determined at the moment of receipt. Holding the crypto may give you a tax problem when you cash in\u201d though, and the exchange rates from crypto to fiat currency will have to be kept minimal \u2014 i.e., \u201csubsidized by the employer.\u201d<\/span><\/p>\n

\u201cIt is surely coming\u201d<\/span><\/h4>\n

However, Ainsworth expects crypto wages to be commonplace one day, though it might take a while, as is the case with many innovative technologies: \u201cIt took 38 years to go from ARPANET [a precursor to the Internet] to Skype. It may take as long for payroll in Bitcoin to arrive, but it is surely coming.\u201d<\/span><\/p>\n

When Ainsworth wrote<\/a> his paper exactly four years ago, he was looking at crypto wages from a global perspective with a focus on companies with operations around the world and employees being transferred from country to country. One scenario he imagines:<\/span><\/p>\n

\u201cIf I had a mortgage on a house in NY, but was going to be stationed in Japan, and then in London for indeterminate periods of time […] I might want my mortgage in NY paid out of my salary, along with some other expenses, but while in Japan (if the company was paying for my housing there), I still might want to get a portion of my pay in Japanese yen (or later in English pounds). Getting paid in crypto would ease that difficulty.\u201d<\/span><\/p><\/blockquote>\n

That probably isn\u2019t the typical worker\u2019s dilemma, though \u2014 think of Suarez\u2019s Miami city workers. Hulme tells Cointelegraph Magazine that the vast majority of goods and services typically needed by an employee still cannot be purchased in crypto assets, which \u201cmeans that the majority of employees would likely rather be paid in fiat currency.\u201d<\/span><\/p>\n

There might also be tax implications in places like the United States and the United Kingdom, where Hulme is based, as \u201cThis will likely raise issues from a PAYE perspective\u201d \u2014 referring to the UK system that collects income tax and national insurance payments from employees \u2014 \u201cfrom a practical point of view and a general tax point of view.\u201d<\/span><\/p>\n

Risks for employees?<\/span><\/h4>\n

People need to diversify their financial holdings, suggests Brody, and right now, the only people likely to demand Bitcoin wages are those already invested in crypto. He adds: \u201cPaying people all or most of their pay in a volatile digital asset poses significant risks for employees. The people most likely to take up this offer are also the ones that are most likely to suffer badly if it goes wrong: people working in the crypto-space already.\u201d<\/span><\/p>\n

\u201cI am a good example,\u201d he further explains: \u201cProfessionally, I am \u2018all in\u2019 on blockchain and digital assets \u2014 my job depends entirely on the success of this sector. Throwing in all my other financial assets into the same bucket is very risky, and if things go badly, that would leave me without a backup plan.\u201d<\/span><\/p>\n

Of course, there is no imperative that an employee has to take all their salary in crypto. Okung, for example, will end up having half his NFL salary in Bitcoin, with the other 50% in fiat currency. CoinCorner, a UK-based crypto exchange and wallet provider, has offered its employees a crypto salary option since 2019, and even though all the firm\u2019s employees participate, \u201cNobody is currently taking 100% of their salary in Bitcoin,\u201d CEO Danny Scott tells Cointelegraph Magazine.\u00a0<\/span><\/p>\n

Still, this might not be the best way to think about the matter, suggests Mallers: \u201cThe most healthy mental framework is to consider Bitcoin your savings account \u2014 money that is intended to be saved and not spent on everyday living.\u201d How much can be safely allotted to a crypto savings plan will differ for each individual. Meanwhile, companies \u201cneed to be prioritizing their ability to recruit and retain talent,\u201d Mallers tells Cointelegraph Magazine, adding:<\/span><\/p>\n

\u201cThose that deny their employees ease of use to receive and hold the best performing asset and savings account in human history will have a tough time convincing the most talented people in the world to be employees.\u201d<\/span><\/p><\/blockquote>\n

Among the benefits for employees from providing a crypto option, Theobald adds that employees don\u2019t need bank accounts, they enjoy advantages like faster access to funding, \u201cand they receive the exact amount sent at the applicable exchange rate.\u201d<\/span><\/p>\n

How does it work?<\/span><\/h4>\n

The logistics don\u2019t seem to be that difficult. CoinCorner, for instance, has held Bitcoin on its balance sheet for many years, which \u201chas made salary payments in Bitcoin fairly straight forward,\u201d Scott tells Cointelegraph Magazine. The firm\u2019s accountant processes everything in British pound sterling from an accounting and tax side, but then the firm converts the required amount of pounds to BTC when making the salary payment. Scott says:<\/span><\/p>\n

\u201cWe take the close price for the end of the month and use that to work out the BTC amount. Unfortunately, this part may get more complicated if you do not hold Bitcoin on your balance sheet, as you would need to buy and then use the rate from the time you purchase the Bitcoin.\u201d<\/span><\/p><\/blockquote>\n

Nor is Bitcoin the only crypto option offered at CoinCorner: \u201cWe support Ethereum (ETH) and Litecoin (LTC) too \u2014 but none of our employees have opted for these as of yet,\u201d says Scott.<\/span><\/p>\n

A company using the BitPay Send platform simply deposits fiat into its BitPay merchant account, and BitPay converts the fiat to crypto immediately before fulfilling an employee\u2019s crypto payout request. BitPay also adheres to Anti-Money Laundering, Know Your Customer,<\/span> Office of Foreign Assets Control<\/span> and other global regulatory and compliance requirements, Theobald adds.<\/span><\/p>\n

A boon for the gig economy?<\/span><\/h4>\n

If a Bitcoin salary option were to become popular, where might it catch on first? \u201cInterest in crypto wages is strong across the globe but we do see higher interest in countries where the local fiat currency is highly volatile,\u201d says Theobald. Interest among firms with cross-border payouts \u201cis also particularly strong, and this is partly driven by the need to make mass payments to the gig economy and affiliate networks\u201d that need to make \u201cpayouts anywhere in the world, on any day of the week, and at any time.\u201d<\/span><\/p>\n

From a freelancer\u2019s standpoint, \u201cOnline jobs that pay in Bitcoin are a fantastic way to source work from anywhere in the world,\u201d <\/span>notes<\/span><\/a> LaborX, a freelance jobs platform, especially with the availability now of fully regulated exchanges and wallet services that store crypto securely.<\/span><\/p>\n

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