What To Consider When Receiving Your Salary in Crypto
With digital currency not only here to stay but looking like it’s going to form an increasingly important part of the mainstream financial ecosystem, many people are looking for ways to acquire bitcoin and other digital assets. Accepting your salary in crypto is one way to build a stake – but there are various factors to consider along the way.
Over the course of the last 18 months, cryptocurrency has established itself as a robust asset class. As borderless, digital money outside of the existing financial system and political structures, it’s the ideal way to transfer value anywhere in the world, quickly and efficiently. It has also proven a stellar investment, with bitcoin appreciating over 1,000% since the lows of March 2020.
No wonder that an increasing number of people are opting to receive part or all of their salary in crypto, or picking up freelance work to earn digital assets – either to help pay the bills, or to invest in crypto for the long term. Earning crypto is the ideal way to get started with digital cash, for a number of reasons. But before you decide to receive your salary in digital assets, there are several important points to weigh up.
The benefits of digital currency salaries
There are many good reasons to work for crypto. One of the key benefits is that you can earn assets that may increase significantly in value over time. But even if you opt to cash out your pay or receive stablecoins (see below), there are still some compelling benefits.
- Access to a global labour market. Crypto is borderless, which means you can work for anyone, no matter where in the world each of you live. Remote work has really taken off due to the impacts of the coronavirus pandemic. Crypto makes that even easier and more efficient thanks to the fast, low-cost international payments it allows.
- Sidestep the banking system. Because crypto doesn’t require any middlemen, anyone can use it. That includes the world’s 1.7 billion people who don’t have a bank account or easy access to adequate banking facilities – with over 50 million Americans fitting that description.
- Work when you want. If you find work in the Gig economy, it can be a very flexible way of earning crypto. You can fit the work around other commitments – a main job, childcare, hobbies, and so on. That allows you to build experience and a portfolio without giving up your existing career – or sink more time into it if you’re looking for a full-time job.
- Get started without spending money. Working for crypto is a great way to dip your toe in the water (or immerse yourself fully). Effectively, you’re converting spare time into digital assets.
When you work for crypto, there are two broad options. You can receive bitcoin and other cryptocurrencies, the value of which is determined by supply and demand, or you can earn your salary in stablecoins, which are pegged to a currency like the US dollar. There are pros and cons to each.
How to receive your crypto salary option #1: Cryptocurrency
The first option is to accept cryptocurrencies like bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and others. These crypto coins have limited supply and their value is set on the open market. They can be very volatile. Even Bitcoin, the best-known crypto with the widest adoption, regularly experiences 5-10% swings in value in a day. Over the course of a full market cycle (around four years) it can appreciate as much as 100 times from the low and crash 80-90% from the high. Even if bitcoin has proven to be a good long-term store of value, then, in the short term it is not a good way to save. One of the factors you should therefore consider is how long you can hold a coin, and even whether you can afford to lose that value entirely.
Other factors to bear in mind are how easy it is to convert a coin to another currency, or sell it and cash out to your bank account. This may be impacted by how widely that coin is listed on exchanges.
Receive your crypto salary option #2: Stablecoins
Stablecoins are crypto tokens, hosted on a blockchain such as Ethereum or Binance Smart Chain, that are pegged to a regular currency like the US dollar. Examples include Tether (USDT), USD Coin (USDC), Binance USD (BUSD) and Dai. The lack of volatility means you are protected from falls in value, but unlike other cryptocurrencies, your coins cannot appreciate in value either. Stablecoins may be a good option if you are simply looking to earn some extra cash to pay the bills, rather than investing in crypto.
Other factors to consider
Aside from these basic questions, there are several other points to think about when you are exploring the world of crypto freelancing. Ultimately, the idea is to make life as easy as possible for yourself, and take home as much of your new pay as you can. Some considerations include:
- Regulation. Are there restrictions around using or trading crypto in your jurisdiction? If you earn crypto, will you be able to spend it or convert it to cash legally? Some jurisdictions may take a less favourable view towards certain cryptos, particularly privacy-focused coins like Monero (XMR).
- Taxes. Similarly, what is the tax treatment for crypto in your jurisdiction? Do you know how much you will need to set aside for tax when paid for freelance jobs or as a main salary? If you intend to hold crypto as an investment, do you know the rules for capital gains tax in your country? Are you also prepared to keep records of all relevant payments and sales?
- Ease/difficulty of use. Are you familiar enough with the technology to manage your own crypto wallet (including keeping private keys safely), or does it make more sense to use a hosted wallet or an exchange account? Do you have appropriate security measures in place to avoid loss or theft of your crypto earnings?
- Fees. Some crypto platforms have much higher fees than others, making it inefficient to transfer small amounts of money. For example, unless you are earning hundreds of dollars, it’s unlikely to be worthwhile using the Ethereum network due to the high “gas” (transaction) fees. Options like Binance Smart Chain are far cheaper. Both are integrated with LaborX, and several different tokens are supported on each blockchain.
Conclusion: The pros and cons of crypto salaries
There are lots of good reasons to get paid in crypto, but it’s also worth doing some research and familiarising yourself with the technology before you start. Freelancer platforms and hosted wallets can take a lot of the headache out of finding work and getting paid in crypto, but it’s still a very different experience to working in a more traditional sector and using the banking system for payments. While crypto freelancing can be a good way to earn some extra cash, the biggest opportunities come when you can hold your pay as an investment and watch it grow over the course of a market cycle. However, there are also risks due to the volatile nature of cryptocurrencies, which you’ll need to learn about and manage along the way.
What are some of the benefits of working for crypto?
Because crypto is completely international and exists outside of the current financial system, you can work for anyone, anywhere in the world, and get paid quickly and efficiently. You don’t even need a bank account.
Are there any concerns or warnings when receiving a crypto salary?
Yes. You should familiarise yourself with the technology first, and learn about how to hold crypto securely. Apps like LaborX provide a built-in wallet to store your earnings, making life easier. You should also make sure crypto is legal in your jurisdiction.
Should I receive my salary in crypto (BTC, ETH etc) or stablecoins (USDC, USDC etc)?
Which currencies you receive will depend on whether you want to simply earn some extra money to pay the bills, or whether you want to invest in crypto for the medium to long term. If the former, then stablecoins will probably be better, because they won’t fluctuate in value. If the latter, then you might want to earn BTC, ETH, LTC etc, which can be volatile but which have historically appreciated significantly in value over time.