If you’re not from New York, specifically New York City, maybe you haven’t heard that NYC had just elected a new mayor in January of this year, Eric Adams. However, putting whatever feelings you have about him to the side, he did something interesting that caught my interest. He requested that his first three paychecks be paid to him in the form of Bitcoin, the online digital currency that has captivated millions for the past six years. This request was surprising and got me thinking, “Is it possible to pay an employee in cryptocurrency?”
Today’s article is going to cover some of the legal statutes that come along with paying employees in crypto.
Is it Legal?
The short answer is: No. Technically, it’s still illegal for businesses to pay their employees in cryptocurrency. This is because regulations set up by the U.S. Department of Labor categorize cryptocurrency as an asset, and it cannot be used as a form of payment to pay employees. The Fair Labor Standards Act (“FLSA”) states: “the ‘wage’ paid to any employee, under the conditions which it prescribes of the ‘reasonable cost,’ or ‘fair value’ as determined by the Secretary”. Cryptocurrency does not fall under those guidelines because of its price fluctuations and since it’s a decentralized form of currency.
I know what you may be thinking, “What about foreign employees that work with companies in the U.S. but are paid in their national currency? How is that any different?”
Foreign currency is initially converted into U.S. dollars, and if it matches the FLSA threshold, only then can you pay someone with foreign currency. A similar concept can be used for paying employees in crypto. However, the DOL and courts are yet to give their opinion on if cryptocurrencies can be considered as a form of foreign currency. Hence, the situation is a little ambiguous. Employers need to be cautious of the situation if they are trying to adopt cryptocurrency as a payment to their employees
Despite all these legal obstacles, Mayor Eric Adams still was able to transfer his city paycheck into the cryptocurrencies Bitcoin and Ethereum using Coinbase, a platform that converts funds into cryptocurrency. Before his funds were made available to him via typical banking methods, Coinbase pulled his paycheck from his bank account, transforming it into Bitcoin and Ethereum.
My Experience with Converting my Paycheck
Following suit with the Mayor of the city I reside in, my employer (oAppsNET) paid me how they usually do with direct deposit and imminently had my funds transferred into cryptocurrency via Coinbase. Playing it safe to the wire, I only converted half my paycheck into a multitude of online currencies. My first thoughts were, “This is pretty cool.” But then, there was a dip. Hours my Coinbase account was funded, Bitcoin dropped 1.92% of what I bought in at, going from 43,000 to 40,000 in a blink of an eye. Ethereum, which was at around 3,100 dropped by 2.84%, making it 2,900 a coin. And as it goes with the stock marketing, all the other currencies followed suit, and I saw the funds I added to my account seemingly dwindle. I didn’t panic, though.