Yes, Bitcoin payroll is a real thing. And with more and more companies deciding to offer it (and cryptocurrencies in general gaining in popularity), it may be the wave of the future. The gig economy and rise of remote working is complementing the rise of virtual currencies in general. Bitcoin is superlative in the cryptocurrency department for many reasons. Whether you think it is here to stay or just a passing fad, it is worthwhile to take the time to understand what Bitcoin is and how it would work in a payroll scenario.
Bitcoin Payroll: What You Need to Know
If you are like many, you may not know what exactly Bitcoin is, let alone how to go about setting up a payroll system that pays people in Bitcoin. In this blog post, we will tackle all of the things you need to know.
Bitcoin is a decentralized currency that is totally digital. It is a prominent cryptocurrency, a growingly popular form of digital currencies that make use of (military-grade, in Bitcoin’s case) cryptography to secure transactions and more. Bitcoin was created by an anonymous person or group. The creator(s) stipulated upon invention of Bitcoin that there are only 21 million that will ever be “mined” and introduced into the world. This controlled supply is popular with fans of commodities like gold. Traditional currency in the sense we know now, on the other hand, means that the government can print more dollars at any time, without the benefit of the gold standard, leading to massive inflation over time.
With Bitcoin now being accepted at more places than ever before, it makes sense that we are seeing the emergence of Bitcoin payroll systems. Many, especially young people, are becoming more interested in Bitcoin and virtual currencies in general. Part of this is because of distrust of centralized banking institutions while others are more interested in treating the currency like a stock to eventually cash out for traditional currency.
What are the pros and cons of using Bitcoin?
Many people like the privacy and payroll security afforded by Bitcoin. And because it is a global currency, there is no worrying about calculating exchange rates or paying exchange fees. This makes it an especially attractive option for remote workers and companies who may be collaborating with talent in other countries. But as you probably know, Bitcoin is currently extremely volatile.
For some, this may be seen as a positive. A young person with an appetite for risk in finances will be drawn to the large potential upside. However, receiving a salary in the form of a Bitcoin payroll might make the average employee nervous if they are also worried about paying rent at the end of the month. This is why many employees and employers who opt to make use of a Bitcoin payroll system usually specify a percentage to be paid that way as opposed to collecting their full salary in the form of Bitcoin.
Setting up a Bitcoin payroll
In order to set up a Bitcoin payroll, a company or its payroll processor will need to set up a process to purchase Bitcoin each pay period (unless the company is somehow already sitting on a pile of it). The amount of Bitcoin to be purchased will change every month as it will be dependent on the percentage of the employee’s overall salary to be disbursed in Bitcoin and what the price of Bitcoin is at the time — remember, this changes frequently and sometimes dramatically, sometimes within a matter of hours. Some services like Coinbase and Circle offer options to lock in prices, but they come with conditions.
Some emerging solutions like Bitwage are helping to streamline the process. With Bitwage, the employee would create an account and then provide their employer with the banking details issued by the platform. Then when payday rolls around, the employer could send a wire transfer (in traditional currency) to the user-specific, Bitwage-affiliated bank account which is then immediately converted into Bitcoin. Bitcoin then moves it to the digital wallet specified by the employee.
While we do not currently process any payroll using Bitcoin or any other cryptocurrency, it is definitely a trend that we will keep our eyes on. Thinking about setting up a Bitcoin payroll system and are still on the fence? Call us up. Depending on which benefits of Bitcoin appeal to you and your employees, we may know of another solution you haven’t thought of yet. And if it does turn out that Bitcoin is for you, we can give you some guidance about how that will factor into tax accounting for both you and your workers. Call today!