Paying to Employees in Cryptocurrency
Statistics show that currently about a third of employees in the IT sector wouldn't mind transitioning to receiving their salaries in cryptocurrency. Some companies are already implementing such solutions. Let's explore the advantages and disadvantages of paying employees in cryptocurrency and why current IT professionals are interested in receiving compensation this way, even though it's becoming relevant in other fields as well.
Advantages of Receiving Salaries in Cryptocurrency
Disadvantages of Paying Salaries in Cryptocurrency
There are only a few drawbacks to using cryptocurrency for salary payments:
Taxation Considerations
In many countries, cryptocurrencies aren't legally recognized as currency but rather as "digital assets." For instance, in Russia, only 20% of a salary can be paid in cryptocurrency.
However, in countries like Japan and Germany, there's no such issue: cryptocurrency is considered equivalent to real money. Consequently, traditional income tax is applied. The solution to taxation issues will vary depending on where the employee resides (or is a resident).
The simplest solution is for employees to file income declarations with regulatory authorities. In this case, only the amount of money actually cashed out after converting cryptocurrency is considered. Income tax is then paid based on this amount.
Practical Examples
Several international companies already allow their employees to receive their salaries in cryptocurrency, including:
GeCrypto Business Solutions
GeCrypto is a cryptocurrency exchange that actively collaborates with business clients and offers access to the following services:
Individual collaboration conditions are applied, meaning business clients can benefit from discounts and the most favorable cryptocurrency-to-fiat exchange rates. GeCrypto has offices in Turkey, Georgia, and provides online services in over 30 countries.
In conclusion, there are numerous advantages to transitioning employees to receiving their salaries in cryptocurrency, with very few drawbacks. Moreover, an increasing number of companies and corporations are offering this option to their employees. Governments are supporting this trend by developing transparent taxation conditions and granting cryptocurrency the status of a fully-fledged payment instrument.
Advantages of Receiving Salaries in Cryptocurrency
- Receiving a salary in cryptocurrency offers several advantages, including:
- Instant transfer execution. You just need to wait for the blockchain transaction confirmation, which usually takes between 15 seconds to 10 minutes. In comparison, traditional bank transactions can take up to 5 banking days.
- No reliance on a specific bank. Employees can later choose their preferred method of converting the cryptocurrency to cash.
- Cryptocurrency can be exchanged for cash in almost any country worldwide. This is particularly useful for remote employees who frequently travel.
- "Stablecoins" are often used for salary payments, which are cryptocurrencies pegged to a stable asset, such as the US Dollar (e.g., USDT, USDC, BUSD). The value of these tokens corresponds to 1 USD, and the US Dollar is one of the most stable currencies, reducing concerns about volatility.
- Cryptocurrency accounts cannot be blocked. Employees can use decentralized wallets like Trust Wallet.
Disadvantages of Paying Salaries in Cryptocurrency
There are only a few drawbacks to using cryptocurrency for salary payments:
- Cryptocurrency needs to be converted to fiat currency since there are very few stores where you can directly pay with tokens.
- There's a risk of cryptocurrency devaluation, but this risk is minimal compared to stablecoins.
- In some countries, receiving a salary in cryptocurrency might require employees to independently declare their income to regulatory authorities.
Taxation Considerations
In many countries, cryptocurrencies aren't legally recognized as currency but rather as "digital assets." For instance, in Russia, only 20% of a salary can be paid in cryptocurrency.
However, in countries like Japan and Germany, there's no such issue: cryptocurrency is considered equivalent to real money. Consequently, traditional income tax is applied. The solution to taxation issues will vary depending on where the employee resides (or is a resident).
The simplest solution is for employees to file income declarations with regulatory authorities. In this case, only the amount of money actually cashed out after converting cryptocurrency is considered. Income tax is then paid based on this amount.
Practical Examples
Several international companies already allow their employees to receive their salaries in cryptocurrency, including:
- GMO Group: Since 2017, employees have been offered the option of receiving their salary in cryptocurrency, primarily Bitcoin.
- Spot.IM: An Israeli company that, as early as 2018, proposed its own initiative for paying salaries in cryptocurrency, approved by the Israeli government. The key point: taxation is carried out similarly to using fiat currencies.
- SC5: A Danish company that was one of the first to offer its employees the option of receiving their salary in cryptocurrency back in 2013. The decision was based on the belief that this transfer method is the safest.
- Ethlance: A unique job market platform where you can find or offer work. Ethereum (ETH) is the primary payment currency. Other cryptocurrencies, including stablecoins, are now also accepted.
- Bitwage: A platform allowing EU and US citizens to receive their salaries in cryptocurrency and immediately exchange it for fiat. Each participant is provided with a dedicated bank account. This also resolves the tax issue, as an online service allows users to upload statements for tax declaration purposes.
GeCrypto Business Solutions
GeCrypto is a cryptocurrency exchange that actively collaborates with business clients and offers access to the following services:
- Accepting and processing cryptocurrency payments (various tokens are supported).
- Executing cryptocurrency-to-cash exchanges at rates comparable to exchange offers.
- Assisting employees in converting their cryptocurrency compensation to cash.
- Real estate payments.
- Carrying out and managing banking transactions (Bank of Georgia or TBC Bank).
Individual collaboration conditions are applied, meaning business clients can benefit from discounts and the most favorable cryptocurrency-to-fiat exchange rates. GeCrypto has offices in Turkey, Georgia, and provides online services in over 30 countries.
In conclusion, there are numerous advantages to transitioning employees to receiving their salaries in cryptocurrency, with very few drawbacks. Moreover, an increasing number of companies and corporations are offering this option to their employees. Governments are supporting this trend by developing transparent taxation conditions and granting cryptocurrency the status of a fully-fledged payment instrument.
