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The case for crypto payroll
Paying your people in crypto is easier than you think
Happy Thursday, operators!
As we near the end of this remarkable (and wild) year, I hope you're making time to acknowledge all your wins and accomplishments. Here’s to a joyful holiday season filled with some well-deserved R&R.
This week’s topic is all about paying your team in crypto — a topic near and dear to my heart as it’s one of the original reasons I founded Gilded.
This week’s topic
💸 The case for crypto payroll
Many web3 organizations pay their employees in crypto — whether in bitcoin, native tokens, or stablecoins. Paying people in crypto has been a major use case since bitcoin was originally invented thirteen years ago.
But what are the benefits (and unique challenges) of running payroll in crypto? And how do you make sure that you get it right?
Why it matters: It’s important for crypto operators and finance pros to stay on top of this emerging trend. Understanding the ”why” is just as fundamental as knowing how to complete crypto payroll transactions securely and without disruption.
Backdrop: It’s becoming increasingly common for crypto-native organizations to pay their team in crypto. Companies like Exodus have paid employees exclusively in bitcoin since their founding. DAOs and NFT collections often pay contributors in stablecoins or native tokens. Crypto job boards even have entire sections dedicated to jobs that pay in crypto.
Beyond crypto companies, traditional brands and governments are beginning to offer crypto as payment or as a benefit. For example, last year Mayor Suarez of Miami opted to get paid in bitcoin and hopes to offer crypto payroll to city employees and allow citizens to pay taxes in crypto.
Why employees like it: Crypto payroll can be a total game-changer for workers.
Worker benefits: Crypto payroll can be an attractive benefit and recruitment tactic.
Banklessness in the developing world: If anyone on your team is based in a country where there’s hyperinflation or lack of bank access, paying them in crypto could be a life raft.
Why employers like it:
Affordable cross-border payments: Without any intermediary, paying people in crypto across the world takes a fraction of the time and cost versus sending wire transfers.
Alignment with the ethos of decentralization: Many crypto organizations choose to pay their employees in crypto simply because they want to eat their own dog food and stay true to the values of open, transparent finance.
The downsides: Of course, it’s not for every org and there are important considerations to make if you’re paying your team in crypto.
Legal compliance: Depending on your jurisdiction in the U.S. or outside the country, it can be tough to know the laws around staying compliant. Laws and regulations are still unclear.
Tax considerations: Since cryptocurrency is treated as property by the IRS, anyone based in the US will incur capital gains taxes when cashing out crypto for profit. But paying wages in stablecoins creates no additional tax burden, since there are no major gains or losses in price.
Price fluctuations: Paying in a volatile asset like bitcoin means paying attention to constant price changes. To account for these changes, Exodus wallet adds 3% to their payroll each period.
How to set up crypto payroll:
There’s no one-size-fits-all approach to crypto payroll, but here are some steps to get started:
Make sure that you understand compliance and legal requirements in your specific locality. Also, make sure to calculate the appropriate tax withholdings.
Make a list of each employee’s crypto address and keep this updated each month.
Double-check that the address is correct before each payment.
Send each payment individually or consider using a tool like Mass Pay to pay many people at once.
Over-communicate the process and how it works with employees.
Keep detailed accounting records of payments for financial reporting purposes.
Bottom line: Paying your team in crypto is an intriguing business practice for some web3 organizations (but definitely not for all). For controllers and the accounting department, that means learning how to both run crypto payroll and track these transactions accurately for financial reporting.
You can learn more about paying employees in bitcoin on the most recent episode of Decentralized Ops with Henri de Ram of Exodus.
From the DeOps World
📚 What we’re reading
Senator Elizabeth Warren (D-MA) and Roger Marshall (R-KS) introduce The Digital Asset Anti-Money Laundering Act
The proposed bill would impose tight restrictions on the digital asset ecosystem and hefty “financial services” regulations for miners, validators, node operators, and developers of decentralized networks. Self-custody wallets are also under fire with the proposed KYC (know-your-customer) requirements, mandating anyone who interacts with a digital asset to disclose their private personal information — all under the guise of “anti-money laundering" measures. This legislation would deliver a huge blow to digital sovereignty and the principles of decentralization and do little to address the issue of “money laundering”. After all, the US dollar is still the number one preferred instrument of money laundering.
New Disclosure Report from FASB
In this new plan from FASB, companies would need to disclose details about their cryptocurrency holdings. They expect to vote on whether to propose a crypto rule and a proposal in the first half of 2023.
The FASB said companies should disclose a table of significant crypto-asset holdings by fair value—essentially the market price—as of the end of each quarterly and annual period. They would give the cost, the fair value and the number of units for each significant crypto asset held. Companies would be required to disclose how they determine the costs associated with crypto assets, for example, as a weighted average based on prices paid for each type of the assets.
MetaMask mobile users can now buy ETH with PayPal
Creating easier on-ramps is a critical step in onboarding the next million users to web3. Non-custodial wallet provider MetaMask is teaming up with PayPal to make buying crypto within the MetaMask mobile app a seamless experience.
Work in web3
👾 Web3 Accounting Job Alert
Messari, the leading provider of crypto market intelligence, is hiring a Staff Accountant to join their team. This is a great opportunity for accountants looking to make the move to web3.
🎁 Give your team the gift of crypto
Thinking of rewarding your team for their hard work with crypto? With Gilded’s Mass Pay, you can send holiday bonuses in BTC, ETH, or stablecoins.
Now through the end of the year, new Mass Pay users can try it out with 0% fees.
That’s all for this week. Thanks for reading and I’ll see you next Thursday.
Brought to you by Gilded 💡
This newsletter is strictly for informational purposes only and does not constitute financial, investment, or tax advice. As always, do your own research.
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