It’s been a big year for Bitcoin. Between hitting an all-time high trading price over $63,000, landing on the balance sheets of major companies, and being recognized as inevitable by financial institutions that once tried to avoid it, the rise of Bitcoin – and the broader adoption of cryptocurrency – is one of the bigger stories of 2021. Cryptocurrencies are becoming more mainstream as a form of payment and investment — or speculation, depending on your perspective.
Perhaps the appeal is in the underlying technology (that is, the use of math, rather than third-party banks, to facilitate nearly instant, inexpensive, irrevocable transactions anywhere on Earth). Perhaps it’s the arguable benefit of holding cryptocurrency, particularly Bitcoin, as a long-term hedge against inflation. Or maybe it’s the indisputable entertainment value of casting a one-minute candlestick chart to a big screen TV to watch the price move on a volatile day (a purely hypothetical scenario).
Whatever the case, cryptocurrencies are clearly here to stay. Innovative employers are responding by putting Bitcoin compensation on the table as a benefit to attract top talent — and it it’s not just tech companies. This year, Twitter, the City of Miami, the City of Jackson, TN, the Sacramento Kings, and others have announced their exploration of Bitcoin payroll. We expect more are coming, and to start seeing employee-driven requests for the option. If your organization is considering paying employees or contractors in Bitcoin, what do you need to know?
Is it Legal to Pay Wages in Cryptocurrency?
The first question you need to confront: whether it is permissible under federal and state law to pay your workers in Bitcoin or similar cryptocurrency.
Under the Fair Labor Standards Act, wages must be paid “in cash or negotiable instrument payable at par.” Cryptocurrency is, of course, neither. And while the more popular cryptocurrencies can easily and immediately be sold for cash, this fact might not matter to the U.S. Department of Labor.
Further, employers must also consider state laws, some of which require wages to be paid in U.S. currency (including California, Washington, Georgia, Maryland, Delaware, Pennsylvania, Michigan, New Jersey, Texas, and Illinois). The specific restrictions and accompanying exemptions vary from state to state. In Georgia, for example, the statute does not apply to salaried company officials, superintendents, or certain department heads, or to employers in the farming, sawmill, and turpentine industries. Meanwhile, in Texas, while wages are generally required to be paid in U.S. currency, “an employee may agree in writing to receive part or all of the wages in kind or in another form.”
For these reasons, you should pay base compensation in the U.S. currency in amounts that meet the federal, state, and local requirements for minimum wage, overtime, or salary-based exemptions. Any cryptocurrency payment program should be…