The crypto boom has reached new levels by touching wages in several countries. Millennials love to receive payments in crypto. To be fair, cryptocurrencies are part of a new financial paradigm, and crypto wages are part of these advancements.
Among the politicians seeking to bridge the gap between crypto-to-fiat payments are Francis Suarez, the mayor of Miami, and Eric Adams, the mayor of New York City. On the other hand, athletes have planned/made to follow suit.
Disturbed signal
Now, different individuals have shown interest in receiving crypto salaries. However, price volatility as well as tax complications – can steal some light from the trend.
At the time of writing, Bitcoin slashed around 11% of its price within a week. Although, the king coin has recovered a bit at press time. It was trading just above the $37k mark with a 3% gain in 24 hours. However, with this discount, the entire salary may also decrease by that amount.
Bloomberg’s recent report highlighted these concerns. They said that the cryptocurrency could certainly fall, but it could also “launch to higher levels than you would ever expect from any year-over-year pay hike in fiat.”
Of course, one of the biggest appeals of being paid with a prominent cryptocurrency is the growth potential. Over the past decade, the price of one Bitcoin has skyrocketed from a few dollars to over 64k dollars. Many people even think that the king coin can reach the $100k mark. But one of the main rules of investing is that “past performance does not dictate future results”. That is no problem.
“To be sure, most people get their paychecks in smaller disbursements during the year. This can mitigate some of the more severe dips in cryptocurrencies by allocating potential gains and losses over time,” Bloomberg added.
But what if there is a large change in price between the last day of a pay period and the date a person receives a paycheck?
“You can make it out like a bandit,” says Mati Greenspan, founder and CEO of Quantum Economics. But if prices drop, “you might as well shoot yourself in the foot.”
Next problem, please
Moving on, tax filings are another concern for most BTC holders, let alone being fully compensated in the top coin. Complicated tax calculations are one of the reasons why cryptocurrency payments can be a headache for both employers and employees.
Shehan Chandrasekera, CoinTracker’s head of tax strategy opens:
“There is always a difference between what the employer pays for that coin and the market value at the time they distribute it as wages because the price changes.”
he said.
Here’s an example that sums it up perfectly. NFL Star Odell Beckham Jrof (OBJ) decided to take his $750,000 salary in Bitcoin seems to have cost him dearly due to the market crash after he signed the deal. OBJ is estimated to have earned 61% less than when he received his salary in fiat because of the aforementioned obstacles.
Sports business analyst and senior executive producer for Action Network, Darren Rovell reiterate similar concerns.
The number of people applauding players for exchanging their salaries into Bitcoins as if they were heroes was amusing.
Rams WR Odell Beckham Jr., at least for the moment, offers a cautionary tale. pic.twitter.com/uW0QDdJrYy
– Darren Rovell (@darrenrovell) January 23, 2022
However, Bitcoin enthusiasts Joe Pompilano (the brother of influencer ‘Pomp’) was quick to rebut the story. But it didn’t stay that way for long.
1. The agreement was made on the 12th.
2. The consolidated payment has been completed. It doesn’t matter when he gets paid.
3. There is no claim of responsibility here. It’s like you call people “legends” for doing anything with Bitcoin.
– Darren Rovell (@darrenrovell) January 23, 2022
This is not the first time crypto assets have caused a huge tax difference.