Jethro Will Be Paid in Crypto
Jethro has been working as a Copywriter since late 2008. He has worked in multiple institutions, from Private Schools to massive Game Development Studios, he has had a taste of varying working environments and office dynamics. Jethro had already experienced being underpaid to being compensated handsomely for being a supervisor.
For all the jobs he had assumed, Jethro, like most normal paid employees, received pay through a company-provided bank account. Fiat currency and paper have always been the way he knows how to get paid—and spend for that matter.
However, this new company he entered opted for another method. And no, it was not going to pay him by check. On his first day, Jethro was asked to set up a Binance account. His employer will be paying him through Bitcoin.
It sounded hip. But a bit disconcerting for him. Mind you, Jethro is familiar with cryptocurrencies, he was deep in research for the writing of numerous articles for a brokerage company he used to work for two years back. He knows the asset. But now that he is being paid through crypto, the knowledge did not give him an assuring feeling.
Jethro is among the many professionals who have been receiving cryptocurrency payments of late.
Cryptocurrency: Despite The Slump
There is plenty to be desired with the crypto industry’s current situation. We are no longer strangers to the fact that the digital asset sector is immersed in what is being touted as the “Crypto Winter”. One of the events that heralded this debilitating blow to the industry is Terra’s apparent collapse which led the crypto market into a bearish phase throughout the second quarter of 2022.
Bitcoin plummeted by 56.3%, while Ethereum by 67.4%. The dive is seen as its worst in their existence. An article published by crypto news outlet, AMB Crypto, alluded to a study done by CryptoCompare which said that the industry’s macro scene was in a dire situation.
Despite this, crypto traders and evangelists are keeping the faith. There are still a lot of massive crypto and NFT projects in the works with various business entities continuing to adopt crypto for whatever use case.
A Bakkt survey published by the financial website, Finbold revealed that 38% of gig workers are open to taking pay through crypto while 50% of them are comfortable getting a portion of their salary in it. The survey furthered that in mid-June and early July, 20% of the workers are already earning in cryptocurrency.
What Small Business Owners Should Know
Apart from paying workers with Bitcoins, small businesses could benefit from crypto adoption in several ways.
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BTC and Fiat Surcharge Protect Margins
Using credit cards means notably high fees. The common value is pegged at 3.25% which may appear to be a small percentage. However, if a company earns a revenue of $1 million yearly, it would be required to pay $32,500. This becomes a pertinent concern as American small businesses only get a 10% profit margin.
As this is the case, it would be advisable for small businesses to accept BTC alongside a “fiat surcharge.” This effectively protects the margins.
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Helps Owners Save
Holding BTC gives small business owners the chance to save better for purchases they might make in the future. Businesses that have adopted Bitcoin would effectively conduct dollar-cost averaging (DCA) daily. This results in the fluctuation of BTC’s Compound Annual Growth Rate (CAGR).
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Direct Conversion of Credit Card Payments to Bitcoin
Stripe and OpenNode have entered into a partnership that allows businesses to turn credit card payments into BTC. This heightens the DCA for transactions.
To take full advantage of this, small business owners can develop their self-sovereign ability to collect payments from BTC via some open-source software. And while this may require more work to be fully set up, users are assured of efficiency and lower costs.
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Taxes? Not a Problem!
Customers in the U.S. experience capital gains or losses on any of their payments should they choose to do them through Bitcoin. However, there are tools available that allow toggling between BTC and USD like mainnet or Lightning. One mainstream option is Strike which allows customers to connect to legacy banks and then pay via the Lightning Network. This will not result in any tax implications.
If you are an employee and you get paid in crypto and spend, sell, or exchange it, you may be required to pay capital gains tax.
For instance, if you decide to sell your compensation of $1,000 worth of LTC which you received as a bonus, if months later LTC’s worth becomes $1,50, you will have a long-term capital gain of $500.
But if LTC falls to $500 before you get the chance of selling it, you will have a $500 short-term capital loss. This could be used to offset other short-term capital gains. In turn, this will reduce your entire taxable income.
Should Your Small Business Integrate Crypto?
While the case has been made that the crypto industry is indeed in dire straits, looking to pay your employees through the asset does not seem to pose too great of a problem.
Stating the obvious, employees would still be able to convert their pay to fiat currencies.
It must also be stated that while crypto forefathers BTC and ETH have recently recorded bad performances, multiple industries continue to adopt blockchain technology. Amongst the many reasons advocates are staying positive is their belief that this crypto winter is just another bursting of crypto bubbles, a part of the asset’s life cycle. As this is the case, the crypto sector is bound to recover.
