If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
by Emma Newbery | Published on Oct. 24, 2021
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Bitcoin wages may grab headlines, but there are tax and legal implications to consider.
Miami Mayor Francis Suarez is pushing ahead with his mission to make Miami the crypto capital of the U.S. -- and even the world. In a video interview this week, he told Bloomberg Technology that the work was a "major priority."
But to make progress, Suarez still needs approval from authorities in Tallahassee. Right now, Miami is not even allowed to hold cryptocurrency on its balance sheet. The mayor is pushing for this and two other measures: Firstly, he wants Miami residents to be able to pay fees and maybe also taxes in Bitcoin (BTC). And second, he wants to be able to pay city workers in crypto. "We're going for a request for proposal in October to allow our employees to get paid in Bitcoin," he said.
Other organizations -- most notably Twitter -- have toyed with the idea of crypto salaries. And major sports figures like the NFL's Russell Okung and the NBA's Cade Cunningham have drawn headlines by asking to be paid in crypto or converting their salaries into cryptocurrency.
If you or your company are considering cryptocurrency payments, it isn't something to take lightly. There are a lot of factors to consider, including the following.
If you're considering receiving crypto wages, it is important you understand the nuts and bolts of the proposal. For example, is the plan to convert a percentage of your wages into crypto each month? If so, make sure you know what the conversion rates will be, who will pay any fees, and what platform/wallet you will use.
Unless your employer has huge crypto reserves they'll use for wages, it's extremely unlikely they'd want to negotiate a full salary in Bitcoin or Ethereum (ETH). It would leave both you and them exposed to the volatility of the crypto market. Until crypto payments become more mainstream (assuming they do), this is a quite risky option.
If you're considering accepting a cryptocurrency salary, you're likely well aware of the high volatility in this market. But it's one thing to handle price fluctuations as part of a buy-and-hold investment. It's quite another when we're talking about your monthly wage.
Your fixed costs -- from your grocery shopping to your rent or mortgage payments -- will likely remain in U.S. dollars. If the price of Bitcoin falls by 20%, so will the real-world value of your wage. At the very least, you'll need to have a substantial emergency fund in place to tide you through in the event that crypto prices fall for a prolonged period of time.
By federal law, wages must be paid in "in cash or negotiable instrument payable at par." But there isn't a clear line on whether cryptocurrency counts as "at par." Added to which, according to JD Supra, different states have additional rules. For example, some states require wages to be paid in U.S. currency.
Before you agree to receive your salary in crypto, make sure that everything is clearly set out in writing and your company is in line with any state regulations.
Cryptocurrency taxes are complicated. The IRS treats crypto as property, and you need to track each transaction. Crypto trades are taxable events that are subject to capital gains and losses. But payroll taxes also need to be taken into account.
If you plan to accept crypto wages, it would be sensible to talk to a professional tax advisor to make sure you and your employer are on the right side of the law.
Crypto payments are fast and secure, and a crypto salary might make sense in one or two specific scenarios. For example, if you work internationally, receiving cryptocurrency payments could reduce remittance costs and speed up payment processing.
But in general, cryptocurrency is not mainstream enough to warrant tying up your wages. It is still too risky, and too difficult to use for day-to-day spending.
There are a number of positive indications that cryptocurrencies are here to stay, but we don't know that for sure. It's still a relatively new and untested market. Putting aside the legal and practical considerations above, your monthly income is simply too important.
A better option? Why not convert some of your income into crypto each month after it hits your bank account? Many cryptocurrency exchanges even allow you to automate your crypto purchases, so you can set up an automatic purchase order to take place shortly after payday.
That way, if there's a dramatic change in the market, you can easily put that transfer on hold. And since you're in control, you can make sure you have cash on hand to cover your monthly obligations.
There are hundreds of platforms around the world that are waiting to give you access to thousands of cryptocurrencies. And to find the one that's right for you, you'll need to decide what features that matter most to you.
To help you get started, our independent experts have sifted through the options to bring you some of our best cryptocurrency exchanges for 2021. Check out the list here and get started on your crypto journey, today.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Emma Newbery owns Bitcoin and Ethereum.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2022 The Ascent. All rights reserved.