‍Cryptocurrency, in simple terms,

‍A cryptocurrency is a type of digital currency that was created using encryption algorithms. Because of the use of encryption technologies, cryptocurrencies serve as both a currency and a virtual accounting system. A cryptocurrency wallet is required in order to use cryptocurrencies.
There are various types of cryptocurrencies, but the following are the most widely known; Bitcoin(BTC), Litecoin(LTC), Ethereum(ETH), Bitcoin Cash(BCH), Ethereum Classic(ETC), Zcash(ZEC), Stellar Lumen(XLM), Bitcoin Satoshi’s Vison(BSV) and Chainlink (LINK).

Cryptocurrencies are created through the mining process, which involves using computer power to solve complex mathematical problems that generate coins. Users of cryptocurrency could also purchase it from brokers, store it, and then spend it using cryptographic wallets.

Cryptocurrencies, once the domain of techies and a weird digital novelty to the rest of the world, are now making their way into the mainstream. Bitcoin is currently accepted as payment for products and services by organizations throughout the world, including Microsoft and Tesla. Bitcoin, the oldest, most precious, and most held cryptocurrency, is increasingly being embraced as a form of employee pay by some businesses. Bitcoin has even become legal tender in countries such as El Salvador and the Central African Republic.

There are some fascinating bitcoin patterns developing in the real world behind all the excitement and headlines. As 20th-century-rooted financial and legal institutions struggle to accommodate a 21st-century tech breakthrough, the public adoption and use of cryptocurrencies, particularly Bitcoin, is one to monitor. Many company executives, particularly those with a significantly tech-connected foreign staff or client base, should be interested in this topic because they are likely already familiar with Bitcoin principles and usage.

In this guide, we’ll take a look at whether or not it is ethical or legal to pay your employees in cryptocurrency.

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Is It Currently Legal to Pay My Employees in Crypto?

Unfortunately, the answer to that is “no” for most parts of the world. However, it is possible to do so in some cases. As crypto sees substantial market growth across Africa, there is an opportunity to merge this technology with existing mobile money infrastructures to further increase financial inclusion. While mobile money can improve the efficiency of domestic payment rails, crypto-enabled services can reduce costs, increase security, provide financially inclusive payment options, and further streamline international transactions for both businesses and consumers. The main African users of crypto, especially Bitcoin, are Botswana, Ghana, Kenya, South Africa, and Zimbabwe.

On the other hand, individual states in the United States may have different regulations. Employers are required to pay the minimum salary in USD in several states, with crypto only being used for payment after that. They may also be required to get formal employee permission to receive all or part of their remuneration in bitcoin. Employers can also engage with a third-party service provider to convert employee payments to Bitcoin and distribute them to their employees.

There are certain advantages to paying staff in cryptocurrency if it is legally and logistically viable. Companies may also choose to pay their employees partially in cryptocurrency and partially in cash (e.g. bonuses in Bitcoin and regular salary in cash).

Companies should therefore carefully scope and plan whether they want to pay staff entirely or partially in cryptocurrency. They also need to make sure that they stay in compliance with local laws and tax regimes in the host country.

Regulating Bitcoin and other cryptocurrencies is often complicated and fluid, with substantial differences in approach between nations throughout the world. In certain nations, paying workers in bitcoin may be more desirable and feasible than in others. For example, the Central African Republic has become the second country in the world to adopt Bitcoin as its official currency.

In several other countries, cryptocurrencies are either outright outlawed or severely limited (e.g., China, Egypt, Qatar, and Nigeria) to the point where they can no longer be used or traded and are essentially banned. Even in nations where cryptocurrencies are widely recognized and integrated, there may be limitations or prohibitions on utilizing them to pay employees directly.

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The Benefits of Paying Your Employees in Crypto

Paying staff with bitcoin has a number of potential benefits and among them; 

1. Speed of transfer
   

Cryptocurrency transactions are virtually instantaneously completed and paid. Equivalent normal banking transactions might take days or weeks to execute, depending on where the employees, payroll, and central offices are located.

2. Self sufficiency
   

Bitcoin and other cryptocurrencies are based on decentralized peer-to-peer networks that aren't dependent on a central bank or another third party. Payments are sent directly to the person receiving the payment, with no participation from financial institutions or governments. This might have good consequences in terms of speed and decreased bureaucracy. 

Workers who already use and understand crypto, as well as those with libertarian leanings who seek to limit their reliance on the state or other authority, may be attracted to being paid in Bitcoin or comparable currencies. The ability to pay in cryptocurrencies may provide companies an edge over competitors in terms of recruiting and retention, particularly if they pay independent contractors or freelancers in computing and related high-tech industries.

3. Tax efficiency
   

Receiving all or part of a wage in cryptocurrency might be more tax effective for some workers, depending on how crypto is taxed in the countries of operation. Bitcoin, for example, is taxed as property in the United States. This implies that if one sells or uses a cryptocurrency that has appreciated in value since they bought it, they'll have to pay Capital Gains Tax (CGT). Some higher earners may want to receive all or part of their pay in crypto rather than cash because CGT is lower than the higher income tax band.

4. Currency value appreciation
   

Cryptocurrencies have the ability to vary in value far more than cash transfers in most nations. This implies that if the value of their cryptocurrency rises, employees may be paid far more than they would have been paid in cash.

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Are There Downsides to Paying Your Employees in Crypto?

While the benefits may outweigh the downsides, knowing those downsides is important in making decisions on how to pay the workforce.

1. Volatility 

Cryptocurrencies may be pretty volatile. In the same way that cryptocurrencies have the ability to grow in value quickly, they may also decrease in value quickly, leaving payments to workers worth less than projected.

2. Acceptance
   

There's the question of crypto's widespread acceptance. Financial fraudsters, money launderers, and other criminals are attracted to cryptocurrencies because of their decentralization and lack of government regulation.

When it comes down to it, though, we believe that the tax benefits (as well as the other benefits we mentioned) are absolutely worth it when it comes to paying employees in crypto, especially in emerging markets like Africa. However, employers must ensure compliance with local laws and tax regimes in the countries of operations.