If cryptocurrency is created to disrupt the existing financial system by greatly improving the transaction speed, privacy, cost and convenience, it will be a matter of time before everyone is paid in cryptocurrencies.
The definition of consumer payment has been evolving since bartering, the earliest known form of value exchange, for goods and services. Today, the predominant form of transactions occur in the form of fiat currencies, which was first used in the 7th century. For centuries, the only change has been how it has been enacted throughout human history. The world has adopted fiat digital payments with emergence of debit cards which represent a useful bridge between old and new methods of fiat payments. Interestingly, we are currently in the midst of another change which may redefine how we perceive payment - through cryptocurrencies.
Many experts feel that cryptocurrencies are the catalyst for the next payment revolution, which certainly works for new and different payment methods as we are gradually moving into a fully digitised world. While the popularity of this new type of currency remains to be seen, there is now a preponderance of crypto debit card options that allow the exchange of cryptocurrency for spendable fiat currency at the touch of a button. Cryptocurrencies, while still an often underestimated means of payment, are having their foot in the door thanks to payment apps and their multifunctionality. Apps, such as Bitpay, Crypto.com, and Revolut, have integrated features that allow buying and selling of cryptocurrencies, as well as spending in some instances, to attract new and savvy mainstream customers to their platforms.
Cryptocurrency as the future of payments
Apps like the above mentioned are where the future of money and payment are heading. According to a report by Pew Research Center, it is estimated that more than 2.5 billion people have smartphones which allows a third of the world’s population to connect to the internet and to enjoy a wholly digital, and convenient payment experience on their mobile devices. Therefore, coupled with appropriate incentives, these apps could drive the new wave of adoption to the masses and create real-world use cases for cryptocurrencies.
In August 2019, New Zealand’s tax authorities made a ruling that allows companies to legally pay its employees in Bitcoin (BTC) and other cryptocurrencies . In addition, companies will be able to deduct income taxes using their current PAYE (Pay-As-You-Earn) frameworks under the Income Tax Act 2007. This bold move by the New Zealand’s government is likely to gain the attention of other crypto-friendly nations, which may result in a series of regulatory reforms pertaining to salary issued in cryptocurrencies, as well as a growing interest in more people looking to receive their salaries in BTC or other cryptocurrencies. Crypto payment apps that offer Visa-backed debit cards may also gain a favorable number of users, since these apps will allow users to spend cryptocurrencies for real-world purchases. However, 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.
Employee’s salary in Bitcoin
Employers, particularly in the tech startup sphere, are offering employees the option to receive their salary in cryptocurrencies in order to attract new talents and complementing this with other job benefits. Bitcoin (BTC) is one of the most popular forms of cryptocurrencies amongst both employers and employees as the preferred cryptocurrency for salary payments. There are several reasons including better USD-to-BTC rates (as compared to paying via the native fiat currency) when dealing with internationally-based employees, or if the company is funded through Initial Coin Offerings (ICOs), where they raised their fundings through BTC, thus an adequate supply of BTC within the company’s reserve for payment-related matters. Also, it can be seen from existing Bitcoin earners where these employees have deployed various methods to manage their crypto salaries.
One approach is through “immediate cash-out,” practiced by Lindsay Holland, assistant director of the Bitcoin Foundation. Like all the foundation’s employees, Holland receives her entire salary in the currency, and she leverages on the available stablecoins such as USDT or crypto payment apps in the event where she needs to convert them into fiat currencies to fulfill her everyday expenses which can only be made through fiat currencies.
Industry and commerce are truly globalized today, with an ever-increasing number of workers working remotely. Bitcoin payments can be sent conveniently anywhere, with the advantage of not having to deal with foreign banking, exchange rates, delays and holding times. Although transaction fees could be incurred, Bitcoins are far easier to handle than those historically levied by financial institutions and can also be used as an easy way to onboard employees in the complex world of investments. Rather than navigating complicated stock options and investment strategies provided by brokers and banks, Bitcoin's direct payment enables an individual to take straightforward and instant control of their own cryptocurrency portfolio. So keeping an open mind to adopting crypto instead of fiat currency might open doors to some lucrative job opportunities.
Encouragingly enough, there are more businesses from the broader world already looking into cryptocurrency as an alternative for the salaries of their employees. In December 2017, the Japanese Internet firm GMO Group revealed that they were offering 4,000 employees the option of earning a portion of their salaries in bitcoin. Recently, the company expanded into cryptocurrency mining and trading, commenting that the change was necessary for "nurturing and developing cryptocurrency literacy."
Understandably, the above examples for Bitcoin are far from being indicative of an universal reality. Cryptocurrencies may gain traction and popularity amongst the people, but they are still struggling to catch up with international financial frameworks and the regulatory bodies which regulate them. The problem is in many cases deeply ingrained. Bitcoin can be illegal to varying degrees depending on the country the employee is in. For instance, Bitcoin has never been legal in any capacity in Bolivia, while in Ecuador the currency was outlawed in mid-2014 as part of the country’s financial reforms.
On the contrary, China’s stance on Bitcoin has been rather tricky as they have banned ICOs, cryptocurrency exchanges and made mining illegal in the country, but only recognised and protected Bitcoin since 2013 as a virtual asset (other cryptocurrencies are exempted from the recognition and protection for the Chinese law). This may in part be due to the fact that many Chinese citizens are very active Bitcoin trading. Similarly, Internal Revenue Service (IRS), the federal agency of the United States, considers Bitcoin as a property rather than a currency, while the Fair Labor Standards Act requires that employers pay their employees “cash or negotiable instruments payable at par.”
Given the fact that legislators around the world have yet to determine exactly the financial status of cryptocurrencies, it may cause other unwanted dilemmas for people looking forward to receiving Bitcoin as salaries, specifically since the legal regulation may encompass tax-related matters which, depending on the employee’s location, can become a complex issue. 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.
A Salary Worth Considering
The prospect of obtaining Bitcoin as a form of salary may be an enticing option for many individuals, especially for millennials, who are also seeking a new form of investment opportunity that has a lower learning curve and capital required as compared to the traditional stock market. However, at the time of writing, cryptocurrencies may carry a great deal of stigma due to the perceived risks and legal implications that come with moving payroll over to this new financial concept, since most regulatory bodies are still uncertain in the exact categorisation of Bitcoin and other cryptocurrencies in the financial market.
Despite its shortcomings, the team at MyCryptoMixer believes that cryptocurrency is definitely gaining traction and exposure in the mainstream market, as evidently shown in growing coverages from mainstream financial media outlets such as Forbes and Bloomberg. Regulatory bodies are taking an active interest and the number of people with a digital wallet is on the rise. If the cryptocurrency space continues to evolve and deliver disruptive solutions for the global financial markets, taking the plunge and switching to Bitcoin for salary payments is definitely a huge step forward for most people, moving forward.