Would you be willing to receive your paycheck in cryptocurrency? In 2018, the staff at a Japanese Internet firm, GMO Group, will be among the first people to understand how that would feel. However, there is more to this than you think. It is not compulsory for employees to receive their salary in cryptocurrencies. They can choose whether they want to receive their salary fully in Bitcoin or only as a fraction of their salary. Critics say that this is done simply to promote their company especially because the hype in financial technologies is at its peak.
Despite this, it is essential that companies acknowledge the risk that comes with it. Bitcoin is a highly volatile currency as it can increase in price, very fast, but can also crash similarly. Hence, what does receiving a salary in cryptocurrencies mean for an organization?
How does the process work?
By giving away Bitcoin salaries, companies will pay based on the digital currency’s value at an agreed time and date. It will depend on the value of Bitcoin for that day. If the employee does choose to sell the cryptocurrency right away, it would be given in cash, similar to how they have been previously paid. A precondition to this is that they must arrange for the sale of the cryptocurrencies in advance. However, the situation is different if the employee chooses to hold onto the Bitcoin for a longer period to see whether the value would go up or down. In this case, the employee will be completely at the mercy of the cryptocurrency market.
The potential is limitless when it comes to the value of the currency. It may increase by $10,000 within a day or turn into absolutely nothing. This method of paying wages has been criticised as an encouragement for employees to gamble. Some even go as far as saying that it would be better to give these employees a lottery ticket instead.
With many critics who are unsure about the future of the cryptocurrency market, this Japanese company’s decision to issue salary in cryptocurrencies will continually receive criticism. More importantly, companies must inform the staff that there is no guarantee that the price of these cryptocurrencies will rise as the price of these cryptocurrencies are purely based on speculation and cannot be compared to traditional investment assets.
How are employees responding?
For some reason, people are not worried about the prospects of cryptocurrencies. More people are willing to take the plunge with the cryptocurrency market. In fact, there are companies that are set up to help convert salaries into cryptocurrencies. An example of this company is called Bitwage. Since its establishment, this platform has helped thousands of users obtain their salaries in Bitcoin.
The success of this platform is evident in 2017 as it processed over $30 million worth of salary for nearly 20,000 users from all around the world. In fact, reputable companies such as Google, Facebook, and the US Navy have also chosen to receive their salaries in cryptocurrencies using this platform. The founder of this platform also voluntarily converted half of his monthly salary into cryptocurrencies because he believes that it is important to accumulate as many cryptocurrencies as possible without worrying whether it is the right time to buy it.
How about the taxes?
Giving a standard answer to this is difficult. It depends on the jurisdiction an investor is in. However, taxes on capital gains seems inevitable especially because there has been an exponential growth in the cryptocurrency market. One thing for sure is that investors can’t run away from taxes forever. Employees who receive their salary in Bitcoin will also be eligible for income tax because of their Bitcoin wages. In the case where the value of the cryptocurrency increases, employees will also have to pay a capital gains tax.
What are the benefits for employers?
The early adopters of the cryptocurrency industries were among the few companies that have been offering wages in the form of Bitcoin. If they adopted this system before it was popular, then the employees would have reaped a good reward from the accumulation of these cryptocurrencies. For other firms, introducing this method of paying salaries simply a business strategy.
Japan GMO has also recently expanded into cryptocurrency trading and mining. They hope that the option of receiving a salary in Bitcoin can help increase the personal experience that these employees have with Bitcoin. In the long run, the company wants to play an active role in promoting cryptocurrency literacy among its employees. In addition, as cryptocurrency is also part of their business, doing this aligns with their vision.
Are there any options beside Bitcoin?
In the future, it is possible that different cryptocurrencies beside Bitcoin will be available for employees to withdraw. With more digital currencies emerging over time, this is not impossible. In Singapore, a blockchain company already uses Pay tokens, which is the digital company currency to pay its employees. They also pay incentives to staff in the form of tokens, which they hope will increase the valuation of their cryptocurrency.
It will be interesting to watch what 2018 has in store for cryptocurrency enthusiasts. What’s for sure is we will be seeing more real-life applications of cryptocurrencies for consumers and businesses.