The pandemic has pushed us closer to a digital future. Virtual work meetings and socials are now the norm. The success of the remote work model has led many companies to switch to remote work on a permanent basis.
In the virtual workplace, your hiring pool isn’t restricted only to your city or province. As employers hire and allow remote employees to work abroad, many may wonder if paying staff in virtual currencies is next on the cards.
What is cryptocurrency?
Cryptocurrencies are virtual or digital currencies. They don’t have a physical – paper or coin – form. They are encrypted for security using cryptography. Unlike fiat money (such the Canadian dollar), cryptocurrencies are not regulated by banks or governments.
What are the different types of cryptocurrencies?
The first cryptocurrency was the Bitcoin that came out in 2009. Though it is still the best known, many alternative cryptocurrencies or altcoins have since appeared. Some examples of altcoins include Ethereum, Binance Coin, Tether, Polkadot, Uniswap.
What are the benefits of paying staff in cryptocurrency?
Bitcoin or altcoin salaries are simpler, faster, and inexpensive to transfer to a Bitcoin or altcoin wallet. Unlike remittances in fiat currencies that can sometimes take days to clear and are subject to bank rules and fees, there are no banks involved in transfer of cryptocurrencies. Digital currencies offer greater financial freedom to users.
Like with gold, putting away part of Bitcoin salary may offer a higher ROI than a regular savings account as the price of Bitcoins may increase over time.
If you plan on hiring staff from across the country or the world, paying wages in cryptocurrencies would be a convenient and cost-effective option.
What are the challenges of paying staff using cryptocurrency?
Though Bitcoins are increasingly accepted by numerous companies, and even some restaurants and bars across Canada, there are some disadvantages of paying Bitcoin salaries:
Tax implications
The Canada Revenue Agency considers cryptocurrency as a barter transaction for income tax purposes. Employers will still have to comply with the CRA rules on deductions at source, remittances, and report employee earnings in Canadian dollars.
Employees, who’d still pay taxes, will also be required to report capital gains while filing tax returns if the value of their digital salary goes up between the time they receive and spend it.
Fluctuations in cryptocurrency prices
There is always the risk that the value of your Bitcoin salary may drop, sometimes within a day. This means employees must convert cryptocurrency into a fiat currency right away.
If you lose your password, you lose your Bitcoins forever
It is critical to secure your password. Bitcoin owners use passwords to access their Bitcoin wallet address. But if you forgot your password, those funds are lost forever. Since cryptocurrencies are decentralized, there is no option to change your password or recover those Bitcoins.
Final verdict?
Like with most things, digital currencies, too, have their pros and cons. You could still try out paying employees in cryptocurrencies. Start by paying a small percentage of staff salary in cryptocurrency and see how that works out.
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