Is Receiving Crypto Salaries a Good Idea? Experts Discuss 4 Downfalls to Consider
In a quest for more flexibility, the rising trend of freelancing has given birth to the concept of the “crypto worker,” where traditional paychecks are replaced with crypto payments.
The popularity of crypto payments has been on the rise, offering freelancers the freedom to be paid according to their preferences. A recent survey found that 93% of freelancers worldwide prefer to receive payments in crypto or stablecoins. This growing interest is fueled by the frustrations many encounter with foreign exchange hurdles, transaction fees, and exchange rate fluctuations when working with international clients. Crypto payments provide a potential solution to streamline payments and eliminate these obstacles.
Experts in the field have highlighted some potential pitfalls of accepting crypto salaries.
KYC and AML Regulations Present Challenges
Despite the trendiness of crypto salaries, Felix Shipkevich, the founder of New York-based law firm Shipkevich PLLC, warns that they may be more complex than traditional payment methods. The main issue lies in the volatility of crypto currencies like Bitcoin. Unlike a stable income, the value of Bitcoin can fluctuate significantly, causing freelancers to potentially see their earnings diminish before converting them into usable cash.
Shipkevich suggests that stablecoins offer more stability, but their value is still linked to potentially risky reserve assets. Freelancers must also navigate a steep learning curve involving digital wallets, blockchain technology, and the nuances of crypto transactions. Additionally, the ever-changing crypto regulations add another layer of complexity, requiring specialized accounting assistance.
Taxation Could Pose a Challenge
Daniel Krupka, the chief research officer at Coin Bureau, points out that calculating taxes with crypto payments is more complicated than with fiat currency. Determining whether gains from holding onto Bitcoin are considered capital gains, regular income, or something else entirely can be challenging, especially with the volatility of crypto currencies. Krupka believes that the tax implications of crypto payments might outweigh their initial appeal for freelancers.
Difficulties in Converting Crypto to Cash
Daniel Fayemi, a backend engineer at Bitvavo, notes that converting crypto to cash (off-ramping) can be difficult depending on the location. For example, in the Netherlands, strict regulations limit the amount of money that can be moved off an exchange without providing personal details.
Stablecoins Shine as Payment Method
Matthew Leising, co-founder at DeCential Media, suggests that stablecoins are a great option for freelancers familiar with crypto and are relatively easy for newcomers to adopt. Stablecoins also offer the opportunity to earn a decent yield within the crypto economy. However, freelancers may encounter challenges when trying to convert their earnings into US dollars or other fiat currencies due to banks’ reluctance to facilitate crypto transactions.
Rebecca Liao, CEO of Saga, is optimistic about the future of crypto payments for freelancers. She believes that as legislators and presidential candidates increasingly embrace crypto, freelancers will have more opportunities to receive payments in stablecoins once comprehensive crypto legislation is established in the US.
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