1. Cryptocurrency is showing clear signs of moving into the mainstream economy, with major companies now accepting Bitcoin for goods and services, and some businesses opting to pay their employees in cryptocurrency.
2. The pros, cons and practicalities of paying employees in crypto need to be carefully balanced against one another and can vary significantly according to the location and characteristics of your workforce. In some countries, cryptocurrencies are entirely banned, while in others they either cannot be used to pay employees, or are so tightly regulated that they cannot operate.
3. Disadvantages may outweigh advantages for a large globally dispersed workforce without strong tech knowledge and enthusiasm. For workers based in financially conservative countries with restrictive cryptocurrency regulations, paying employees in crypto may be impossible or not financially viable.
4. On the other hand, a company might have a large number of tech-savvy workers who already have their own Bitcoin wallets, and are located in countries where regulations are broadly supportive of cryptocurrency integration. Paying these workers in cryptocurrency could save their company time and money while boosting employee engagement.
5. Developments and trends around public acceptance and consumer use of Bitcoin and other cryptocurrencies should be watched carefully by business and HR leaders, with current and future opportunities in mind.
Once the preserve of tech experts and a mysterious digital novelty in the wider world, cryptocurrencies are finally going mainstream. Global companies including Microsoft and Tesla are now accepting Bitcoin as payment for goods and services. The longest established, most valuable and most widely held cryptocurrency, Bitcoin is becoming an accepted form of employee remuneration for some companies. One country, El Salvador has even made Bitcoin into legal tender.
Beneath all the hype and headlines, there are some interesting cryptocurrency trends emerging in the real world. The mainstream acceptance and use of cryptocurrencies, especially Bitcoin, is one to watch, as 20th century-rooted financial and legal systems grapple with accommodating a 21st century tech innovation.
This issue should be of interest to many business leaders, especially those with a heavily tech-linked international workforce or customer base, who are likely to already be comfortable with cryptocurrency concepts and usage.
Can I pay employees in crypto?
It is possible for companies to pay their workforce in cryptocurrencies in some cases, in some countries (e.g. UK, USA or El Salvador).
In some other countries, cryptocurrencies are completely banned (e.g. China, Egypt, Qatar) or so tightly restricted that they cannot practically be used or traded and are effectively banned. Even in countries where cryptocurrencies are relatively well-accepted and integrated there may still be restrictions or bans on using them to directly pay employees.
In the USA, regulations can vary between individual states. In some states, employers are obliged to pay the minimum wage in USD, with crypto only usable for remuneration beyond this point. They may also be obliged to get employee written authorization that they wish to receive all or part of their salary in cryptocurrency.
An alternative for employers is to partner with a third party service provider who can convert employee payments into Bitcoin and disburse these to the workforce.
Where it is legally and logistically feasible to pay employees in crypto, there are some advantages to this option. Companies might also opt to pay their staff partly in crypto and partly in cash (e.g. bonuses in Bitcoin and regular salary in cash).
If you are thinking about paying employees wholly or partly in Bitcoin or another cryptocurrency, you should scope and plan carefully. You will need to ensure that you remain compliant with local laws and tax regimes, and that your workers are still able to access their payment.
The regulation of Bitcoin and other cryptocurrencies is usually complex and can be fast-changing, with significant variation in approach across different countries around the world. Paying workers in cryptocurrency may be more desirable and realistic in some countries than others.
What are the benefits where I pay employees in crypto?
There are several potential advantages to paying your employees in cryptocurrency, including:
What are the risks or disadvantages if I pay employees in crypto?
The risks and disadvantages of paying cryptocurrency to your staff are considerable and would need to be managed and mitigated. For example:
Horizons has extensive experience in supporting employee payroll and payments around the world, including advice on the implications and opportunities of developing tech and wider global trends. Get in touch today to discuss your company’s needs.
Frequently Asked Questions (FAQ)
It may be legal in some countries to pay employees with cryptocurrency (e.g. El Salvador) but is banned in others (e.g. China).
Companies should explore the specific legal position for their countries of operation in detail. Even where cryptocurrencies themselves are legal, not all countries will allow them to be considered as a wage or salary. The decentralization and lack of official oversight in cryptocurrencies could also make it hard for an employer to demonstrate full tax and legal compliance.
This question should be carefully examined by local legal and tax experts. The answer varies according to individual tax regimes and cryptocurrency regulations. e.g. In the UK, tax is due on all earnings - money, assets, benefits or anything with financial value. Cryptocurrencies meet these criteria and tax must be calculated and paid according to value at time of payment. In the USA, the IRS taxes Bitcoin as property.