Getting paid in crypto?

New opportunities

Cryptocurrency transactions, based on blockchain technology, represent a novel financial system by providing many advantages over conventional fiat currency. Due to their unique features and more control over assets, people are starting to consider whether there is a possibility of getting paid in crypto.

If you are a frequent reader, you probably remember that we laid down a list of professional athletes which are paid in crypto in this article: 'Crypto sports: Which athletes are paid in crypto?'.

The regulatory aspect of receiving crypto payments has been unclear for a while. Many employers that issue or work with digital assets have been asking for clear guidelines on legal implications surrounding the idea of compensating employees in cryptocurrency tokens. Even outside of the crypto assets industry, employers and employees have expressed interest in receiving crypto earnings. 

A November 2021 Nasdaq press release highlighted a global survey conducted by the deVere Group that demonstrated that more than a third of Millennials and half of Generation Z would be happy to receive their salary in Bitcoin or other digital currencies.

Keep in mind that this article is not legal advice and shouldn't be treated as such. It is for educational purposes and contains only general information about legal matters. You should always consult a professional for legal or other advice.

Compensation in crypto assets in the United States

In the past few years, the legal system in the United States has been preoccupied with the classification of cryptocurrency tokens as securities. Another interesting question that came to the legal scene was related to tokens as a type of compensation for someone’s work. 

Back in 2023, a court in the Southern District of New York stated in the case SEC v Ripple Labs, Inc case that distributions of the XRP token as a form of employee compensation did not satisfy the first count of the Howey test; in other words, it didn’t amount to any type of investment. 

With that being resolved, there were still other legal issues in need of a quick answer. If crypto assets are akin to traditional monetary compensation, how can it be resolved that wage regulations in the United States require that wages must be in U.S. dollars? 

For example, the federal Fair Labor Standards Act laid down the need for wages to be paid in cash or negotiable instruments and to meet the minimum wage requirements as well as overtime exemption requirements.  

All this indicates that crypto payments need to fit into existing labour regulations in the United States or any other jurisdiction where the potential employer and employees reside. 

Back in 2021, a former employee sued the Elysian Global Corporation in the case of Magill v. Elysian Global Corporation alleging that the company didn’t pay his wages in the form of $200,000 worth of Ethereum, despite performing work for the company and being paid only a minor amount of the company’s native token known as ELY. 

The plaintiff’s claims were dismissed by the court for lack of personal jurisdiction, but a discussion linked to various wage claims was triggered.

The case that was dismissed on jurisdictional grounds did not involve payments of a certain number of tokens, but a specific U.S. dollar amount worth of crypto assets so the discussion wouldn’t be about failing to pay an employee above the minimum wage threshold, yet whether the employer was liable for non-payment of one of its employees.  

Long story short, compensating employees with cryptocurrency assets provides interesting opportunities but introduces several legal concerns that must be considered. 

In addition to the need to obtain written authorisation from employees, employers need to comply with labour regulations or even pay minimum wages and overtime hours in the native currency to avoid any further issues as well as fulfil tax obligations.  

Dubai court recognises crypto payments

In 2024, a Dubai court ordered a company to compensate a worker through a crypto token, as stated in the employment contract. The ruling stood out as a precedent, raising several legal questions along the way. 

Even though the ruling didn’t unequivocally stipulate that crypto is a legalised form of salary payment in the region, it recognised a specific virtual asset known as EcoWatt tokens as a valid part of the worker’s compensation package. The court indirectly stated that the compensation package could include digital assets.

Case background

The case in question began when the employee as a plaintiff sued the company for allegedly not paying wages and wrongful termination compensation. The employment contract of the plaintiff stipulated a monthly salary in the native fiat currency and an additional 5,250 EcoWatt tokens.  

The centre of the dispute was the alleged failure to pay a crypto portion of the salary for six months, along with the allegedly wrongful termination of employment.  

A traditional approach in 2023

In 2023, the court recognised the inclusion of EcoWatt tokens in the employment contract but still refused to award the amount in these tokens, stating that the employee failed to provide a clear method of calculating the value of the crypto assets in its fiat equivalent.

This statement from the 2023 judgement reflected a cautious and traditional approach in which the court required concrete evidence of the digital currency’s value before it would enforce such a claim.

Embracing crypto payments

A reversal happened in the summer of 2024 when the Dubai Court decided to take a more progressive stance and ruled in favour of the plaintiff. The court acknowledged the validity of payment in cryptocurrency and ordered the respondent to conduct the payment in EcoWatt tokens instead of converting it into fiat money. 

The new decision was based on the principle that wages are an employee’s basic right in return for the agreed work, along with the fact that the country’s law stipulates that the employer is required to determine the amount and type of wage in the employment contract, and if not, that the court shall determine it.  

The Dubai Court further stated that the employment is obliged to pay the wages on due dates, either through the Wage Protection System or any other approved payment processors. Since the respondent didn’t provide any evidence of payment of the relevant salary for that period, the court ordered the company to pay the value of wages in EcoWatt tokens. 

This case is interesting because the interpretation of legal provisions of local laws evolved between two judgments, showing off a more progressive standing and a broader acceptance of digital currencies and crypto transactions within the country’s existing labour and financial regulations.

What is crypto payroll and how is it transforming employment contracts?

Crypto payroll refers to the activity of paying employees with cryptocurrencies instead of traditional fiat money. The compensation mainly takes the form of Bitcoin, Ethereum or stablecoins pegged to the value of a fiat currency. 

As the Dubai Court ruled, the employment contract stipulated that the employee should be getting paid in crypto as well. As more people accept crypto payments, we are probably going to witness a rise in the number of employment contracts stipulating a salary or a portion of the salary in digital currency.

If you want to learn more about crypto, check out available courses at the Learn Crypto Academy.

The need to remain compliant in your jurisdiction

Each country in the world has a divergent regulation on what should go into compensation packages that are regulated under labour law. Even though basic principles are the same as well as regulated by international treaties, each employer and employee needs to be aware of local laws, especially when it comes to overtime pay and minimum wages. 

Some countries have adopted cryptocurrencies entirely such as the Central African Republic and El Salvador. Many other countries don’t permit the use of cryptocurrencies, but didn’t resolve the situation regarding getting paid in crypto clearly.  

Keep in mind that the crypto industry is still maturing, and the law sometimes has problems keeping up with new technologies. It is believed that a wider acceptance of cryptocurrencies will amount to a better legal aspect as well.  

For example, many European countries are generally open to the use of cryptocurrencies and there are several important laws, either EU or local, regulating virtual assets. On the other hand, most of these countries haven’t dealt entirely with the notion of receiving crypto salary.

Don't forget about crypto taxes

In many jurisdictions, getting paid in crypto is viewed as getting paid in fiat currencies. In other words, it is seen as ordinary income and subject to income tax.  

However, income tax may not be the only kind of tax people need to pay. When someone later sells or swaps crypto, it can be subject to capital gains tax.  

Simply put, crypto transactions can be seen as a disposal of an asset so it might be required to pay taxes on profits made from the disposal. 

To explain this better, let’s look at how several jurisdictions deal with crypto taxes in terms of salaries.

In the United States, the IRS made it clear that when someone gets paid in crypto, it is seen as ordinary income and subject to income tax. If the person receives the payment and decides to later sell, swap or spend crypto, they will need to pay the capital gains tax as well. 

In the United Kingdom, the HMRC laid down guidance for people getting paid in cryptocurrencies as it is viewed as money’s worth which refers to any kind of benefit from employment that doesn’t take the form of fiat money. 

Therefore, crypto payments are subject to income tax as well as national insurance contributions on the value of the asset. As in many other countries, the person who decides to later sell, swap, or spend crypto will need to pay the capital gains taxes. 

Finally, in Australia, the regulator made it clear that getting paid in crypto can be seen either as ordinary income or a fringe benefit, depending on the type of agreement a person has with the employer. For later selling, swapping, or spending that crypto, the person might need to pay the capital gains tax. 

Apart from learning about domestic regulations on crypto taxes, it is important to keep detailed records of all cryptocurrency transactions, including the date of the acquisition, the amount received, and the fair market value at the time of the receipt.

Pros of getting paid in crypto

Following up with all the regulatory news in the area of crypto salaries, the notion of getting paid in crypto may be appealing. Let's take a look at the main advantages of receiving crypto payments.

Crypto earnings are fast and secure

Crypto transactions are faster than getting the money in your bank account. Sometimes it can take a few business days to get the paycheck in the bank, yet cryptocurrency transactions settle almost instantly. Once the cryptocurrency is in your crypto wallet, you can use it immediately. 

Secondly, cryptocurrency is known for its robust security traits. Employing blockchain technology that secures and validates transactions amounts to a higher level of security over your personal finance.

Crypto payments provide lower transaction fees

Crypto payments are linked to lower transaction fees. In contrast to traditional banking systems that bring to the table multiple charges, especially when it comes to international transactions, crypto transfers are a more cost-effective form of payment. 

Crypto salaries could be anti-inflationary

Fiat-based salaries can be susceptible to inflation and depreciate in value. On the other hand, cryptocurrency transactions are plagued by volatility, but they have the potential to increase in value during times of inflation.

Cons of getting paid in crypto

Getting paid in crypto also has some drawbacks. Here are a few things you should consider before asking for a crypto payroll.

Cryptocurrency is volatile

A big criticism of cryptocurrency as a means of payment is volatility. Its price can swing broadly in a very short period which can impact the real value of the paycheck. Even ‘blue chip’ cryptos such as Bitcoin and Ethereum can experience price swings. 

This risk can be mitigated by getting your salary in stablecoins as a type of cryptocurrency that is pegged to a fiat currency such as the U.S. dollar.

Crypto earnings are sometimes hard to use on a daily basis

Finding where to use your cryptocurrency for daily purchases can be challenging. Even though the user base is growing at a fast pace, it still hasn’t reached critical mass in many countries so you might have a hard time using it to pay bills or buy groceries.