Did you know that some businesses are paying their employees in Bitcoin and other cryptocurrencies? The rise of cryptocurrencies and other digital currencies appears to have expanded the definition of money and has created a conversation around the role of central banks and other regulators.
A cryptocurrency is a digital currency that is created and managed through the use of advanced encryption techniques called cryptography. While there are a number of different kinds of cryptocurrencies available today, Bitcoin is by far the most well known.
According to the source website, the Bitcoin was created in 2009 based on peer to peer technology. Unlike fiat currencies, which are managed by governments, there is no central bank or authority that runs Bitcoin. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and anyone can take part.
Bitcoin can be used as an international currency. When an employee gets paid in Bitcoin, they can easily exchange it into virtually any fiat currency at any time, especially when the exchange rate is in his or her favour. For the employer, remote contractors or employees who live offshore can be paid in Bitcoin, so they choose which currency they would like to exchange it for.
As a global currency you can send Bitcoin to anyone, anywhere in the world without worrying about cross-border remittance fees, management or processing fees.
However, the pros come with some cons. Bitcoin and other cryptocurrencies tend to be quite volatile in terms of their value, so the employee may suddenly find themselves in a losing position. Thus it is not advisable to pay the total salary in Bitcoin.
Cryptocurrencies have seen significant increases in value over the last few years, it’s important to note that those increases in value may be seen as capital gains by Revenue Agencies and are taxable as such. Essentially, you must pay capital gains on the increased value of your cryptocurrency.
Section 1 of the Labour Act prevents the payment of wages through means other than legal tender the wages of a worker shall in all contracts be made payable in legal tender and not otherwise; and if in any contract the whole or any part of the wages of a worker is made payable in any other manner the contract shall be illegal, null and void. This implies that any payment of wages via Bitcoin. However, this may not apply to persons excluded from the definition of a worker under the Act, such as Persons exercising administrative, executive, technical or professional functions as public officers or otherwise.