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May I Have My Paycheck in Bitcoin?: Crypto Payments Explained

March 7, 2022, 10:00 AM

More and more often, employers are fielding a question that would have been unheard of even five years ago: “Can you pay me in Bitcoin?”

Attorneys say client requests for how to respond are only getting more prevalent, especially from employers in the tech space and those trying to acquiesce to worker requests in the tight labor market.

A handful of politicians and athletes have touted their cryptocurrency paychecks in recent years, and payroll processing companies are stepping in to fill a demand for companies to offer the same option for everyday workers.

Still, the legality of paying workers in crypto is murky, and the process, administratively daunting, lawyers say.

1. Is it legal?

The Fair Labor Standards Act, a 1938 statute, dictates how workers in the U.S. receive wages. Currently, workers must be paid in American currency, which is rooted in the statute’s origins, according to Lisa Schreter, a Littler Mendelson P.C. shareholder, and dates back to when employers paid their workers in script that could only be used, for example, at company stores.

So, legally, the payment of wages in crypto is not recognized at this time. Wages must be paid in cash or a negotiable instrument payable at par—like a check.

The fact that cryptocurrencies can be converted to cash won’t address that underlying concern, Schreter said.

2. So how are people doing this?

There are still ways to turn wages into crypto. Companies such as payroll service provider Papaya Global can convert your wages as you’d like.

“You’re still being paid in your local currency,” said Eynat Guez, co-founder and CEO of Papaya Global. “We will eventually convert the net amount that you are entitled to in crypto.”

The company is still responsible for required local payroll taxes this way. “We are always here to ensure we are supporting compliance for our clients,” she said. “We are not trying to help anyone pay less taxes.”

Schreter advised that if employees wish to convert their wages into crypto, the employer should “stay out” of the secondary transaction, or conversion process, to mitigate wage-related litigation risk.

“Employers would be well-advised to make sure you are educating your employees on the risks associated with cryptocurrency and the tax issues associated with cryptocurrency, including capital gains,” Schreter said.

3. Is anyone getting a crypto paycheck?

Some companies are interested in extending this offer to workers, according to Olaoluwaposi Oshinowo, of counsel with Wiley Rein LLP.

He said he’s answered many questions on the topic, particularly from “companies in the tech space, especially who want to capitalize on trends, demonstrate how innovative they are.”

New York City Mayor Eric Adams—in an effort to push the city to be more crypto-friendly—said he’d be converting his paycheck to digital assets, and Miami Mayor Francis Suarez made a similar statement. Athletes like Aaron Rodgers have also at least partially bought in to the idea.

Oshinowo said he’s even looked into the option for himself, citing his personal interest in cryptocurrency and saying that he “bought into Bitcoin pretty early.”

Papaya Global’s Guez hedged the high-profile announcements of crypto paychecks.

“It’s important to say that although we are allowing it, it’s not becoming the norm,” she said.

4. Are there other risks?

Volatility is one of the most glaring concerns. The values of cryptocurrencies can fluctuate drastically, creating a risky landscape for the everyday worker.

Capital gain taxes—occurring when a worker sells or buys another cryptocurrency—are also a cost to consider.

Schreter predicts the interest will grow, and with that will spring up open legal questions.

“Plaintiffs’ lawyers are always looking for new theories and new opportunities,” she said.

Read more

NYC Mayor Likely Lost About $1,000 on His First Crypto Paycheck

Miami Mayor Seeks Wider Crypto Use After Taking Pay in Bitcoin

Bitcoin’s Latest Plunge Highlights the Danger of a Crypto Salary

Dechert Litigator Sees Pushback to U.S. Crypto Regulatory Effort

To contact the reporter on this story: Paige Smith in Washington at psmith@bloomberglaw.com

To contact the editor responsible for this story: Andrew Harris at aharris@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com