What If Your Employees Want To Get Paid In Bitcoin?
Whether you consider it a bubble, a trend or the next big thing, Bitcoin—and cryptocurrencies like it—is a force to be reckoned with in the modern economy. Bitcoin’s meteoric rise over the past year has pushed it onto the list of assets that savvy investors want in on—with a growing list of other cryptocurrencies in hot pursuit as the 'Next Big Thing.'
Is It legal?
The answer isn’t simple. In some countries, the question of whether you can pay your employees in Bitcoin may be a non-starter. The currency is illegal to varying degrees in Morocco, Ecuador, Nepal, Bolivia and China. That list may get even longer in the future. With the spotlight growing on cryptocurrency, there’s a risk that governments of additional countries will rethink its legal status. In the United States, at least for now, there’s no reason that you shouldn’t theoretically be able to pay your employees in Bitcoin. In reality, though, it would be incredibly difficult to comply with U.S. tax laws if you decide to make the move.
That’s because you can only withhold taxes for employees in U.S. dollars, and you can only claim payroll costs in U.S. dollars on company tax returns. Your company’s books would have to track the exact dollar value of the corresponding Bitcoins. None of the major financial ledger systems, including SAP, Intuit and Xero, have a mechanism that allows for that. At the moment, adhering to legal standards would simply be a tracking nightmare.
Are the rules going to change?
Governments are trying to figure out exactly how to navigate cryptocurrency. The rules are still being written. While it could be years before a comprehensive approach is set in stone, the direction that governments are heading in is toward more regulation. The UK and the EU already plan to crack down on Bitcoin.
The U.S. is likely to follow with its own restrictions for several reasons. Right now, the dominance of the U.S. dollar gives the U.S. government powerful tools to impact international policy. They can freeze assets, deny assets and control currency flows. Avoiding government interference is one reason why criminals conduct illicit business in Bitcoin, and that the administration has recently called for more regulation. It’s possible that there may be a middle ground where Bitcoin becomes a government-controlled technology that still maintains a degree of openness. Either way, the rules surrounding Bitcoin are likely to change, and they’re likely to change quickly.
Will it maintain its value?
Cryptocurrency has no inherent value. With no underlying security or asset, its worth is purely dependent on what someone else will pay for it and who will accept it as currency. While that’s technically true of the U.S. dollar as well, the major difference is that no major mainstream companies have signed on to accept Bitcoin—or any cryptocurrency, for that matter. If a company like Google, Apple, Amazon, or Square were to come out and agree to accept Bitcoin payments, they could propel Bitcoin into a more permanent state. Otherwise, there’s a huge risk that it could just be a fad. Cryptocurrencies can fall out of favor—just look at what happened to ShadowCash.
That’s risky not just for the employees being paid in Bitcoin, but also for the companies paying them. Even if employees agreed or asked to be paid in Bitcoin, you can imagine that if the value of Bitcoin began to spiral downward, so would employee morale. Bitcoin’s technology has the full potential of becoming the new reality, but it won’t be there yet until it becomes a true and viable alternative to traditional money. Companies should think carefully about whether they want to pay in Bitcoin before it does.
Is it worth the hassle?
With so many grey areas and so many logistical hurdles to overcome, the next question becomes: even if it’s possible to pay employees in Bitcoin, why bother? Is all of the hassle worth it? For some companies, the answer could still be a clear and resounding “yes.” Paying in Bitcoin can be a unique attraction for acquiring new talent. It can draw the type of innovative, early adopter candidates that banks and tech startups love. In a world where competition for the best minds is fierce, that can make a difference. Taking a risk to be part of the Bitcoin experiment can also pay off in terms of building a company’s brand. Jumping in can show leadership and demonstrate that a company is financially and technologically savvy, and is ready to push the envelope.
Looking Towards the Future
We’re already moving past the “what if” stages of paying in cryptocurrency, with Japan’s GMO Internet Group paying some of its employees in Bitcoin. With the recent stock market correction and continuing concerns about further losses, alternative compensation methods could become even more attractive than they already are. Working around the complications of paying in Bitcoin may tricky, but a committed CEO can push the agenda through. Paying in Bitcoin may seem like a speculative exercise now, but one day soon it could become a reality.
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