In recent months, more consumers, merchants and financial institutions have started accepting cryptocurrency as a form of payment for everyday products and services. Global companies including Microsoft and Tesla are also now accepting digital assets as payment for goods and services. In fact, El Salvador has even made Bitcoin legal tender within its borders. But what does this mean for business owners and employees? Can employees get paid in cryptocurrency?
Beneath all the hype, there are a few interesting crypto trends emerging. The mainstream use of cryptocurrency is en route, especially with 20th-century-rooted financial and legal systems accommodating this groundbreaking innovation. This article will explore the current landscape of cryptocurrency payments and what the future may hold for digital currency.
Crypto Acceptance Across the Globe
In certain countries like the UK, United States, and El Salvador, paying employees in cryptocurrency ranges from being possible to being encouraged. In others, such as China, Egypt, or Qatar, cryptocurrencies have been banned outright, with many countries tightly restricting the asset class to ensure they cannot be traded or spent.
Further, in the United States, regulations can vary between individual states. In some states, employers are obligated to pay the minimum wage in USD, with crypto only usable for remuneration beyond this. They may also be obligated to get written authorization from employees that they agree to receive all or part of their salary in cryptocurrency.
In Canada, cryptocurrencies are not considered legal tender and no legislation currently exists to manage their use for salary or wages payments. This means that employers can choose to pay their employees in cryptocurrency if they or their employees want to. The European Union (EU) has taken a similar position to Canada; there are no specific laws regulating the payment of salaries or wages in cryptocurrency, so it is up to each individual employer to decide whether or not they want to offer this option to their employees.
Can you pay your employees in cryptocurrency?
Is cryptocurrency wage legal? While such restrictions and legalities do exist, they have not curbed the enthusiasm of companies from paying employees in cryptocurrency.
In some cases, employees may be willing to receive their salary entirely in cryptocurrency. This will require employees to set up a digital wallet and have some understanding of how to manage digital currencies. While this is not yet a mainstream option, it is one that is becoming more popular as awareness of cryptocurrency grows.
Companies can also opt to pay their staff partly in crypto. Like paying entirely in crypto, this requires some know-how on the employee side, but this also raises a myriad of compliance and tax issues, requiring companies to be vigilant of local laws and tax regimes so employees can easily access their payments.
An alternative solution is for employers to partner with a third-party service provider (hint hint!) who can convert employee payments into or from cryptocurrency and disburse them to the workforce in their preferred ratio of cryptocurrency and cash.
4 Benefits of Paying Employees in Cryptocurrency
There are a number of potential benefits for companies who choose to pay their employees in cryptocurrency.
1. Reduced transaction costs
Cryptocurrency transactions are often cheaper than traditional bank transfers. This is because blockchain networks don’t have the same overheads as banks and other financial services firms, meaning there is no need to pay fees to a third-party financial institution.
2. Faster payments
Cryptocurrency payments can be processed much faster than traditional bank transfers. This is because there is no need to wait for clearing and settlement. We all know how much of a pain international money transfer can be, and digital assets can be particularly beneficial for companies with employees overseas, who need to receive their salaries on time.
3. Increased security
Cryptocurrency payments are made using networks called blockchains, which are secure and decentralized structures for managing ownership data. This reduces the risk of fraud and chargebacks, which can be a frustrating issue with traditional payment methods.
4. Attracting top talent:
People working within the cryptocurrency space are some of the most qualified professionals on the planet. Giving people the ability to own their money without interference from a bank or centralized governing entity is complicated, and Web3 firms are paying top dollar for skilled professionals. Paying employees in cryptocurrency could help businesses attract the best talent, especially if you’re paying independent contractors or freelancers in computing or related high-tech fields.
What are the challenges of paying employees in cryptocurrency?
There are also some challenges associated with paying employees in cryptocurrency.
The value of cryptocurrencies can be incredibly volatile, which means that the value of an employee’s salary could change from one day to the next. This could make it difficult for employees to budget and manage their finances.
One way of avoiding this is by paying employees in stablecoins, which are cryptocurrencies that are pegged to the value of fiat currencies like the US dollar. Another (much more convenient) option is to use a platform like Binamite, which includes contractor and invoice management services, tax and compliance guidance, and splits payments between crypto and fiat currencies based on employee preferences.
The process of paying employees in cryptocurrency can be complex, requiring businesses to set up digital wallets and understand how blockchains work. This can be a challenge for businesses who are not familiar with this technology. Binamite abstracts this complexity behind a user-friendly interface, letting businesses do what they do best, while we ensure payments get where they need to be, whether it’s a digital wallet, a bank account, or both.
3. Legality, Taxes, and Compliance
There may also be tax implications associated with paying salaries in cryptocurrency. Depending on the country, employees may be required to pay income tax on gains from appreciation in the cryptocurrency’s value. Paying salaries in cryptocurrency can also pose compliance risks for businesses, particularly in jurisdictions where the legal status of cryptocurrencies is still unclear.
Paying Employees in Cryptocurrency – The Bottom Line
Paying employees in cryptocurrency is a complex process that comes with a number of challenges. However, blockchain-based currencies offer a wide range of benefits, enough to convince thousands of businesses across the globe to adopt and support the technology. While there are certainly risks to paying employees in cryptocurrencies, platforms like Binamite are streamlining the process, dealing with all the underlying nonsense so you don’t have to.
And if you are looking for a crypto payment solution for your business, Binamite can help. Binamite is a borderless payments platform that gives businesses the flexibility to pay their employees, contractors, and freelance workers using their preferred payment method, while ensuring recipients can split their pay between fiat and crypto in any ratio. It’s the most flexible, comprehensive, and convenient solution to paying and getting paid in digital assets. Head over to Binamite and Sign Up for free!