In early February, Tesla invested $1.5 billion into Bitcoin, with an announcement it would start accepting Bitcoin payments for its cars in the near future. Just days later, Twitter CFO Ned Segal stated that the company was considering the introduction of $BTC salary payments for its staff.
The unfortunate drop in Bitcoin’s (and therefore Tesla’s) value just two weeks after Musk’s announcement showed that Bitcoin is still a volatile asset. But Bitcoin is just one big name among hundreds of steadily growing blockchain currencies. And with the tide of changing sentiment, is the broader cryptocurrency sector set to become a bigger part of our daily lives?
Australia was one of the first nations to treat cryptocurrency as legal tender. It seems fitting that leading the world with crypto-based salary agreements should follow suit. Just 3 years ago, roughly 5% of Australians owned digital currency. That number is now at almost 20% - flying ahead of American crypto ownership rates of just 10%.
The gathering steam of the crypto movement has only been bolstered by widespread distrust of central banks. Westpac, Commonwealth Bank, ANZ, and NAB have long held a monopoly over Australian consumers, and businesses have been speedy in seizing the opportunity for something a bit different, and a bit more democratic.
Paying employees in crypto: benefits for employers
- Cryptocurrency is the obvious answer to unfavourable exchange rates. If money can be sent across the world within a singular currency, businesses avoid huge amounts of sunk cost.
- The pandemic has only accelerated the worldwide gig economy. Remote working is the new normal. Freelancers and ‘digital nomads’ (read: those with no fixed banking address) are proliferating, offering select and valuable skills that may not be available locally. Businesses of all sizes now operate on a global stage, primed for the obvious benefits of a global currency (or as close to one as we can get).
- Globalised transactional systems have long been in place for consumer marketplaces, but salary payments have additional legal hoops to jump through. Blockchain currency addresses these hoops. The Australian Tax Office is impressively savvy when it comes to cryptocurrency, having self-regulated crypto as a nation since 2017. Companies like Wagepoint and Bitpay are already popping up to help companies new to crypto payroll streamline their systems.
Paying employees in crypto: benefits for employees
- Receiving your salary as cryptocurrency is fast, agile, and cost-effective. With fees like Litecoin’s average charge of $0.02, it’s a no brainer as an alternative to hefty transfer fees and deductions. Freelancers can receive proforma payments in minutes rather than days, fostering trust and efficiency between non-local parties.
- ‘Crypto-salaries’ don’t require proximity to a national bank. For those who can receive money from anywhere in the world, access to new markets and opportunities skyrockets.
- Receiving salary funds in cryptocurrency is an efficient way to immediately place and hold investment in digital assets. As with any investment, there is risk, but the rewards can be huge.
Are there any cons to crypto-salaries?
Cryptocurrency is still a little-understood field by the majority of people. The first question for companies should be whether their employees are well-informed enough to make a rational decision about accepting payment in cryptocurrency.
The second question is, naturally, one of expense. The Fringe Benefits Tax means around 47 cents on the dollar is payable for Australian companies paying staff in crypto. This is the most obvious draw away from this option. Tax policy may change as attitudes to crypto evolve.
If a company has a global employee pool, streamlining crypto-salaries may not be possible due to nation-specific legislation.
Finally, the volatility of some cryptocurrencies makes it hard to achieve expected consistency in wages. Paying employees in a stablecoin (such as USDC or USDT) which is pegged to the US dollar, could help alleviate volatility though.
Companies like Bitpay are also working to address this issue. Bitpay funds payments in fiat and leverages the blockchain to send pre-tax payments without having to own or handle digital currency. This helps to eliminate exposure to volatility and risk.
Just a decade ago, cryptocurrency seemed like an arcane concept - a dark art for tech nerds. But it’s beginning to emerge as a contender for a new financial norm. The post-pandemic world may just provide the perfect storm for cryptocurrency to be embraced on a broad public scale.
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