The recent bullish run of Bitcoin exploded the crypto market and spurred more individual interest in cryptocurrency. Its recent $60,000 price hike helped establish its potency. As a result, businesses are interested in accepting it as payment.
This extends to the labor market wherein employees now demand that their payroll be processed as cryptocurrency paycheck. But its legitimacy and regulations are still unclear. Despite that, employees are demanding cryptocurrency paycheck.
Cryptocurrency volatility can make individuals doubt its sustainability as a payment method. But this volatility hasn’t stopped individuals from continuous involvement in cryptocurrency. Its bull ride gives credence to those who believe that these digital currencies will become future currencies. That is, crypto will be accepted and adopted globally.
Despite the difficulty involved in predicting the price of cryptocurrencies (like Bitcoin, Ethereum, Litecoin, and other coins), individuals across different industries are willing to receive payment with crypto. They placed their cryptocurrency paycheck demands on the ease of transactions and transparency attached to crypto.
This becomes easier when both employees and employers are not residents of the same country. With the crypto payment option, employers will send their payments without passing them through certain government agencies or filling some forms to pay remote workers.
However, specific considerations are essential to double-check before employers or employees start including crypto payment options in their paycheck system.
Why Pay Employees with Crypto?
The complexity of cryptocurrency paycheck may discourage employers from adopting it. However, the benefits attached to paying employees with crypto cannot be ignored. One of those significant benefits is transaction speed, efficiency, and security, especially when international payments are involved.
Another benefit is the removal of processing fees involved in making cross-border payments. This process will require conversions and third-party while attracting huge processing fees. But cryptocurrency payments will help reduce those costs with instant payments. Likewise, there is an elimination of third parties.
Blockchain transparency places it above other payment methods. You can alter the details of transactions despite making them public on other payment platforms. But you cannot make a change for any transactions happening on a Blockchain network. As a result, there is security and transparency while initiating cryptocurrency paycheck.
Employees can leverage cryptocurrency to make more money with little work. This happens when employees hold onto (HODL) their crypto coins and allow the market to hit a bullish run wherein they will place a sell order and scoop their profits. As a result, they can use the extra money to manage some other bills.
One more benefit that employers may derive from establishing cryptocurrency paychecks is attracting top talent in their respective fields. This places businesses ahead of others. As a result, they attract talents that share the same vision as forward-thinkers.
Employers’ Concerns About Cryptocurrency Paycheck
The continuous debate about the incorporation of cryptocurrency paycheck meets different challenges on the employer’s desk. The two significant challenges are the tax and volatility surrounding crypto classification as an asset or currency.
Another challenge employers are facing is the classification of their workers as contractors instead of employees. This is an attempt to transfer the tax responsibility onto their employees. As a result, the employees are solely responsible for filing their federal and state taxes. That is because the federal tax law will see them as self-employed professionals.
Tax Implications of Cryptocurrency Paycheck
There are different tax implications associated with cryptocurrency compensation. It varies based on other federal laws and state laws. But it poses debt challenges to both employers and employees when not approach right.
There are different regulations surrounding cryptocurrency, but the blockchain network on which cryptocurrencies are hosted makes it hard to impose tax regulations. While the Internal Revenue Service categorizes it as a property instead of currency, there is a liable charge to be placed under the income tax.
And this may be delicate for individuals because the coin’s market value upon purchase will be taxed instead of the present holding price. This may incur more tax debt, and individuals may not be willing to let go of their digital coin investment to clear such tax debts.
Aside from the federal tax law, some states only allow paychecks to be issued in U.S currency. As a result, individuals who are willing to receive crypto payments will be denied this option. Likewise, there are difficulties to establish that an employer paid his employees his actual salary via cryptocurrency paycheck.
This can cause an employer to be charged for violating the minimum wage law, resulting from the processing fees deducted from making the crypto payroll. Likewise, the recipients of the coins are liable to face capital gains taxes when they trade their coins. The holding time determines if it will be short-term capital gain charges or long-term capital gain charges.
Cryptocurrency Volatility Posing Challenges for Cryptocurrency Paycheck
The volatility of cryptocurrency is a hot debate over paying employees with Bitcoin and other coins. That is because it may be beneficial (bring more money) for the employee. Meanwhile, it can render them penniless in the next minute. And this can spur up the issue of distrust between the employer and the employee. An instance is a quick drop in crypto value before it reaches the recipient account.
Another challenge is the availability of cryptocurrency. The most popular coin used to make payment is Bitcoin, and employers may not be holders except they mined it before. Otherwise, they may have to purchase it from some merchants and pay into their employees’ accounts. This may be a lot of stress for employers.
Will Crypto Become a Paycheck in the Future?
Paying employees with cryptocurrency is a new concept, and some employers are pushing for its legitimacy. As much as this will require a thorough process for its legitimation, there will be regulations and different services to ensure that it is reliable and has little to no risks involved.
As such, cryptocurrency compensation may become the future employee payment option. And this may have no risks.