JP Richardson, the CEO of Exodus, a crypto wallet platform, gets paid in bitcoin. He also pays his roughly 270 employees the same way. They are not the only ones. Soccer stars Aaron Rodgers and Odell Beckham Jr. have taken at least a portion of their salaries in bitcoin. Then there are the mayors: Miami Mayor Francis Suarez said he would take his entire $97,000 salary in bitcoin in the controversial hope of attracting crypto investors to the Magic City. Not to be outdone, New York City Mayor Eric Adams I take your first three paychecks in a combination of bitcoin and ethereum. With such big names endorsing bitcoin paychecks, they are officially a trend. It is not surprising, then, that according to a recent pollMore than a third of millennials and half of Gen Z respondents said they would prefer to earn part of their salaries in bitcoin.
“Employees want more flexibility and they want autonomy in all aspects of their work life. Receiving payments in cryptocurrency is an extension of this change,” said Phillip Bauknight, chairman of the Fisher Phillips Cryptocurrency and Blockchain Taskforce. Bitcoin payments allow workers to be paid instantly, without an intermediary financial institution. Cryptocurrency has also proven to be a good long-term investment: Bitcoin is the best performing asset of the last decade, appreciating above 31,000%. Members of the tech-savvy generations who believe that Bitcoin is the future are racing to ride this momentum.
But accepting a salary in bitcoin has its drawbacks. Among them: volatility. While accepting a bitcoin paycheck might sound great, it requires some knowledge of this risky asset and careful budgeting for anyone who isn’t a mayor, CEO, or future Hall of Famer.
When Richardson received his bi-weekly paycheck on December 1, 2021, he was sure the price of bitcoin would go up. Bitcoin had notched a new record of over $68,000 in November and then submerged. So he did not cash any of his crypto paycheck. “All of December, he just went down, he just went down,” Richardson said. Bitcoin closed December with a 19% drop, his biggest monthly loss since May 2021. As the value of cryptocurrencies fell, so did Richardson’s paycheck. It ended up losing almost 20% of its value. Adams also lost money during the crypto market crash. according to a New York Post analysishe lost more than $1,000 from his first paycheck (he takes home about $5,900 for biweekly paychecks, based on average tax withholdings).
For technical information, Adams, Suarez, and Richardson don’t actually take payments in bitcoin or ethereum. Rather, your paychecks are immediately converted to crypto. Richardson said that Exodus owns roughly 1,300 bitcoins, which is nearly half of his company’s balance sheet. On payday, the crypto software company, which requires all employees to be paid in bitcoin, changes an employee’s salary from US dollars to bitcoin and sends it to the employee’s crypto wallet.
Unlike Exodus, the New York City government does not own bitcoin and it’s not allowed to pay workers in cryptocurrency. Adams had to get creative and convert his salary into bitcoin and ethereum using Coinbase. And Suarez has said that he uses Strike to convert his salary into bitcoin. Basically, they are using their wages to buy some coins. David McCarville, a trust and estate attorney at Fennemore, likened paying in cryptocurrency to creating recurring stock purchases in order to invest for the long term. “You’re not timing the market and the entry points,” McCarville said. “I think a lot of investors think that kind of investment strategy … is better than trying to time the market.”
Receiving payments in bitcoin is not for everyone. Richardson said losing him “sucks,” but added, “I can afford to do that.” Adams doesn’t seem upset either. “When you’re a long-term investor, you don’t look at your portfolio,” he said. CNN.
But Richardson and Adams don’t live paycheck to paycheck: They operate at the higher end of the risk spectrum and don’t need to clear their crypto checks right away to buy groceries or pay rent. But for the average person, that loss can be much more difficult to absorb.
Take Richardson’s employees at Exodus as an example. They live all over the world, so when payroll is done, they are often asleep. By the time they wake up, there could already have been a quick and unexpected downward swing, instantly slashing the employee’s salary. Exodus provides a 3-5% buffer to account for bitcoin price volatility and trading fees, but it is common for the bitcoin price to rise or fall by 5% or even 10% on any given day. . Richardson encourages his employees to sell most of their bitcoins upon receipt to cover everyday expenses.
Exodus employee Allysa Howell chooses to convert 90% of her bitcoin paycheck into dollars within 24 hours of payday. “I take 10% right now of my monthly payment…and play with it inside my wallet,” Howell said. “That’s my risk tolerance.” “Living within your means and budgeting carefully” should be prerequisites for anyone interested in accepting a crypto salary, McCarville said through a spokesperson.
Crypto volatility could present other challenges beyond losing. Fisher Phillips’ Bauknight warns that paying employees in bitcoin is a gray area. “Cryptocurrencies do not fit neatly into the boxes of existing statutes and regulations,” he said. the Federal Fair Labor Standards Act requires employers to pay a minimum wage. If an employee is paid right after a market pullback and the cryptocurrency loses a substantial chunk of value, a disgruntled employee could argue that the employer violated minimum wage laws. tax implications they are another hurdle an employee must overcome: the ups and downs of cryptocurrencies mean that employees risk paying taxes based on payments that have subsequently lost value. If one makes a profit selling the coins, he is also subject to capital gains tax. The Internal Revenue Service doesn’t care that Adams lost $1,000; she will still pay taxes on the $5,900 paycheck.
Despite all the headlines about celebrities drawing their salary in cryptocurrency, there is not much that can be done with the crypto check. Trying to live on bitcoin is not realistic for most people. Howell, who lives in Colorado, has the option of paying her mortgage in bitcoin after closing on his house. But he still can’t walk into a Starbucks and pay for his coffee with bitcoin.
“Personally, I think it’s more of a marketing gimmick,” said Alex Taub, founder of Upstream, a platform where anyone can start and run a decentralized autonomous organization (DAO). Upstream does not currently pay employees in crypto. “So far no one has asked,” Taub said, but admitted that as cryptocurrencies become more commonly accepted for necessities like rent and gas, “then maybe it makes more sense.”
But the digital infrastructure still needs to catch up so Adams can use his crypto to pay for the subway or Suarez can pay for coffee. Until that happens, a bitcoin paycheck isn’t the most practical option.