Crypto Payroll: Pros and Cons

Crypto payroll, also known as "crypto paychecks" in plainsman terms, is a sign of the growing popularity of cryptocurrencies. Today, over 420 million people own cryptocurrencies, with the total market cap of all cryptocurrencies worth $1.4 trillion US dollars. What was predominantly viewed as an investment asset is increasingly being used as a medium of exchange; 93% of cryptocurrency owners say they would use it for purchases, while 59% who have never held cryptocurrency would consider doing the same.

Some people also want to get their salaries paid in their favored cryptocurrency. One study suggests that more than a third of millennials (those aged between 26 and 42) and half of Generation Z (25 and below) would be happy to receive half their salary in Bitcoin or other forms of cryptocurrency, including stablecoins.

In this article, we’ll provide a guide to what businesses need to know before they set up crypto payroll, including the key benefits, the risks, and how to get started.

What is Crypto Payroll?

Crypto payroll refers to the practice of compensating employees or contractors with cryptocurrencies such as Bitcoin, Ethereum, and stablecoins.

The concept of crypto payroll is relatively new, emerging as cryptocurrencies have gained popularity and mainstream acceptance as a form of payment. Adoption is growing, with an increasing number of companies offering crypto to their employees. Coinbase, Blockchain.com, and GMP Group are some notable examples. In parallel, we are seeing the rise of specialist crypto and stablecoin payroll providers, such as Bitwage, that enable companies to pay their workers in crypto.

Let’s take a look at some of the benefits, and risks, to a business that wants to pay employees in cryptocurrency.

Pros and Cons of Using Crypto Payroll in Your Business

There are a range of benefits for businesses that give their employees and contractors the option to get paid in crypto, lets dive into them!

Pros:

Attracting Talent

Offering crypto can be attractive to crypto enthusiasts. This cohort is typically young, tech-savvy, and forward-thinking. These traits are valuable, even if your business has nothing to do with crypto or blockchain services. Crypto payroll can be particularly advantageous for employees and workers in regions with limited access to traditional banking services, or where the domestic fiat currency is unstable.

‍Lower Operating Costs

Global businesses must pay staff worldwide. When paying salaries in fiat, businesses will face the burden of making international transactions, including bank processing fees and currency conversion. Cryptocurrency payments take place across blockchains, which are country-agnostic and carry much lower transaction costs. This leads to reduced fees and lower HR work.

Faster Payment

Another drawback of traditional payroll systems is the time it takes to process fiat salaries. This is especially true when paying employees with overseas bank accounts, where the wait, depending on which country and bank used, can be up to a week from the moment the payment is initiated. Cryptocurrency payments are much faster and often settle within a matter of hours. Whereas full-time staff typically receive their salary payments monthly, speed is not so much an issue, freelance and contractor staff, on the other hand, will favor businesses that pay their invoices immediately.

Anti-inflationary

Whereas fiat salaries depreciate against inflation, cryptocurrencies like Bitcoin have the potential to rise in value. This can boost the real value of an employee’s salary (although the opposite is also true). For those who do not like the volatility of cryptocurrencies, they can opt for stablecoins. Stablecoins are cryptocurrencies that are backed by fiat currencies like the US dollar. These are great for companies that would like to keep all the benefits that crypto payroll can offer while removing the volatility that is inherent with cryptocurrencies.

Cons:

Volatility

A major criticism of cryptocurrency as a medium of exchange is price volatility. For example, bitcoin, the largest cryptocurrency by market cap, has been as high as $97,000 and as low as 15,000 in the last 12 months. What’s more, the price can swing very dramatically in a very short window. This volatility can impact the real value and spending power of employees’ take-home pay. Stablecoins – a type of cryptocurrency that pegs its price to a fiat currency, typically the US dollar – can mitigate this risk.

Read more about the benefits that stablecoins offer versus other cryptocurrencies, such as bitcoins.

Regulatory Compliance

Employers must navigate complex and evolving cryptocurrency regulations to ensure compliance with tax laws and financial reporting requirements. The state of cryptocurrency regulation varies internationally, as does the tax status of crypto salary payments, with some jurisdictions treating it as income, and others as an asset transfer.

What’s more, in most countries the standard is to report salary and staff payments in the local currency. Without uniform agreement on these matters, it is hard for companies to establish global policies and protocols for crypto salary payments.

Learning Curve

Receiving a salary in cryptocurrency requires employees to be comfortable using the associated technology and to understand concepts such as public and private keys, as well as how to off-ramp into fiat currencies as needed.

Employees who are not familiar with blockchains and cryptocurrencies run the risk of mismanaging their salary payments, or even losing them completely. Using Bitwage minimizes this risk since we handle all the complex technology and companies only have to send an ACH or wire transfer.

Doing Better Business with Bitwage

Enabling crypto payroll is a decision that holds both promise and prudence for global businesses. The benefits of speed, reduced transaction costs, and exposure to talent are indeed enticing. However, it's important to mitigate risks and set yourself up for success with a well-known pioneer in the space like Bitwage.

If you are looking to pay your employees in cryptocurrency, Bitwage makes the process easy and stress-free. Give your employees the opportunity to receive cryptocurrency using Bitwage as a simple add-on to your existing payroll system.