Beyond the headlines: The real uptake of Bitcoin wages

Beyond the headlines: The real uptake of Bitcoin wages – Mail Bonus

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Are cryptocurrency wages an idea whose time has come? Maybe not. After all, it’s one thing to dabble in Bitcoin (BTC) with your excess cash and quite another to take a significant portion of your salary in BTC.

In addition, there are often questions about taxes and custody of cryptocurrencies, as well as concerns about price fluctuations. There is also the issue of getting real things and services can currently be bought with cryptocurrencies.

So it’s no surprise that aside from a few famous athletes like Tom Brady and Aaron Rodgers and some prominent mayors of major US cities, relatively few people outside of crypto seem to have taken this next step in crypto adoption.

It is in that context that one must evaluate NYDIG’s recent announcement of a “partnership” with the New York Yankees baseball team that will allow players and other employees to “convert a portion of their salary into bitcoin through the NYDIG platform.” Is this the start of something new, given that it comes on the heels of a difficult crypto winter? Or is this just another PR stunt, jumping on the bandwagon already established by American football and basketball players?

Interestingly, the NYDIG offered some evidence that Bitcoin wages may actually become a secular trend beyond recent headline-grabbing cases, particularly among younger workers. According to its press release:

“NYDIG research shows that 36% of workers under the age of 30 said they would be interested in allocating a portion of their salary to bitcoin. Nearly 1 in 3 workers said that when choosing between two identical jobs at different employers, they would choose the employer that helped them getting paid in Bitcoin.

NYDIG is not alone in identifying Millennials and especially Gen Zers as prime candidates to take crypto pay to the next level. In fact, a recent analysis of 100,000 employee contracts by one global recruiting firm indicated that crypto wages appear to be on the rise, especially among “borderless” remote workers, and especially residents of certain hyperinflationary regions or those with shaky banking systems, such as as Latin America.

Others have also suggested that workers’ demands for a portion of one’s regular salary in cryptocurrencies or stablecoins may be immune to market fluctuations in the price of Bitcoin and other cryptocurrencies, although that sometimes seems hard to believe.

Younger generations are still interested

On that last point: In November, a deVere Group survey reported that a third of millennials and half of Gen Zers would be happy to receive 50% of their salary in Bitcoin and/or other cryptocurrencies. This survey was conducted when the price of the crypto market was rising. After the 50% plus drop in crypto prices since then, does the financial advisory group think younger generations are still interested in receiving their paychecks in cryptocurrencies?

“Younger generations are still interested in receiving their wages in cryptocurrencies as they have grown up with technology. They are “digital natives,” deVere Group CEO Nigel Green told Cointelegraph, and more comfortable using cryptocurrencies than older generations. Moreover, “they know the future lies in technology and appreciate the inherent value of borderless, digital, global, censorship-resistant and non-confiscatable currencies.”

“From our company, 90%+ [of employees] still stack Bitcoin regularly monthly,” said Danny Scott, CEO and co-founder at UK-based CoinCorner LTD, which has kept Bitcoin on its balance sheet for several years and offers employees a BTC pay option, Cointelegraph reported. “If anything, we’ve had more inquiries in recent months from companies wanting to pay their staff in Bitcoin.”

In June, an Ascent survey reported that “44% of Americans would consider receiving part of their salary in cryptocurrency, and 36% said they would consider receiving all of their salary in cryptocurrency.” Yet this survey of 2,000 American adults was conducted on May 6, 2021 and May 25, 2022, when BTC was still near $30,000. The price stood at about $23,000 on August 1st by comparison.

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Adam Poulton, CEO of Get Paid In Bitcoin – a Bitcoin payment solutions platform based in Australia – challenged the idea that the #PaidinBitcoin phenomenon is completely immune to market price effects. “Our business, while designed to remove the speculative nature of Bitcoin, still suffers from the emotional roller coaster of price spikes and crashes,” he told Cointelegraph, further explaining:

“Our service anticipates the influx of new customers in bull markets and the decline in trades in bear markets.” This is an issue we are still trying to address in the long term.”

People who stop and start the process of accumulating Bitcoin are actually doing worse by trying to time the market, Poulton added, “rather than just doing the raw dollar cost averaging strategy that our platform does.”

Aim higher in 2022

Deel, a global payroll platform, regularly reviews 100,000-plus cross-border employment contracts in 150 countries to uncover trends. The company reports that more and more employees are taking crypto as part of their salary.

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In the six-month period from January 1 to June 30, around 5% of all monthly payments from the Deel platform were taken in crypto, up from just around 2% in the previous six-month period. Dan Westgarth, chief operating officer at Deel, told Cointelegraph that he expects this growth to continue, with 8% in the second half of 2022 a real possibility. Moreover, this development is largely ‘market failure’ – ie. not in relation to the market price of crypto.

However, there are considerable differences between regions. Sixty-seven percent of Deel’s crypto withdrawals in the first half of 2022 were from Latin American (LATAM) countries, and another 24% from Europe, the Middle East and Africa (EMEA). In comparison, North America accounted for only 7% of crypto salary withdrawals and the Asia-Pacific region (APAC) for only 2%.

How can this difference be explained? Three different groups are driving this trend, according to Westgarth. First are the investment types, who are looking for a good long-term investment. The second group is remote workers who reside in countries with aging banking systems. And the third group is remote workers in hyperinflationary countries such as Turkey or Argentina.

Many banking systems in the LATAM region are old, and the cost of processing payments to these countries is time-consuming and costly, explained Westgarth. By comparison, crypto transfers are quick and cheap, so workers take a portion of their entire salary in crypto and often immediately convert it into local currency. Workers in places like Argentina could fall into all three groups, as could investors living in high-inflation areas with legacy banking systems.

When employees choose to take all or part of their pay in crypto, it’s not always in Bitcoin either, according to Deel. Less than half (47%) in the latest Deel survey received some payment in BTC, although this was still the leading option, followed by USD Coin (USDC) (29%), Ether (ETH) (14%), SOL ( 8 %) and Dash (2%).

Asked about the surprisingly high USDC share, which was more popular than Ether, Westgarth suggested that the stablecoin could be the first choice in some hyperinflationary countries where trust in government is low and exchange rates are not always transparent. Those workers, however, don’t want to take the investment risk of BTC or ETH, so a stablecoin like USDC represents a sort of middle ground, he suggested. In any case, “We allow employees to choose how they want to be paid – local currency, crypto or USDC.”

Green sees continued growth in crypto wages over the next five years as Bitcoin becomes mainstream. As this happens, liquidity will continue to increase and volatility will continue to decrease. It’s all part of continuing a decades-long trend, and Green expects that “Most large companies will be offering crypto payment options to employees within five years.”

Taking custody of your own BTC

There are many other questions about crypto as a reward, including custody. On that last point, if people are going to take crypto for pay, they need a place to store it safely. NYDIG, for its part, is not actually paying New York Yankee baseball players in Bitcoin but in a BTC-denominated portfolio. Not everyone agrees that’s the best way to go.

“Our platform is aimed at people who take control of their own Bitcoin,” Poulton told Cointelegraph. “From our perspective, the actual ownership and delivery of Bitcoin is extremely important as it reduces the counterparty’s risk of having to rely on other parties for the safe delivery of your value into the future.”

Others question why employees would want to be paid in Bitcoin when there is almost nothing you can buy with it. “I understand that the ‘brick and mortar’ adoption of Bitcoin is still very low,” Poulton replied, although the number of Bitcoin-enabled credit cards has been on the rise. Never the less:

“By simply receiving a bit of your salary in Bitcoin and keeping it in a safe wallet, you are saving for the future and preparing your family for a possible inflationary environment in the future.”

Another interesting aspect of the “crypto for pay” movement is gender participation. The percentage of female Bitcoin earners has been growing, according to Poulton. “Our female migration was between 7%–8%,” but with the new company-to-business platform, “it’s now more like 38%–40%.

Macrotrends support growth

Other business trends are also contributing to crypto wages. In many industries, there is “a high demand for talent and a shortage of available candidates,” according to Deel’s recruiting report, so “more companies are looking outside higher-cost countries to find quality talent.” Demand for product and design roles, for example, is shifting from the US to countries such as Argentina and India.

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Deel’s latest survey saw huge increases in labor contracts in places like Georgia, Armenia and Belarus in the EMEA region, Kyrgyzstan, Azerbaijan and Thailand in APAC and Trinidad and Tobago in LATAM, Westgarth said. It is often much easier, cheaper and faster to pay remote workers in relatively “exotic” locations in cryptocurrencies than through traditional banking channels such as the SWIFT system.

Overall, mass adoption of cryptocurrency — along with crypto wages — is likely inevitable over time, according to Green. “But there are still hurdles to overcome, including a lack of understanding by senior management, flexibility and regulatory compliance.