The real adoption of Bitcoin wages

The real adoption of Bitcoin wages
The real adoption of Bitcoin wages

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

Also, there are often tax and custody issues about crypto, as well as concerns about price volatility. It is also a matter that few actual goods and services can currently be purchased with cryptocurrency.

It is therefore not surprising that, aside from some celebrity athletes like Tom Brady and Aaron Rodgers and some high-profile US metropolitan mayors, relatively few people outside of crypto watchdogs seem to have embraced 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 paycheck into bitcoin via the NYDIG platform.” Is this the start of something new, given that it comes on the heels of a harsh crypto winter? Or is it just another PR stunt, jumping on the bandwagon already established by professional American football and basketball players?

Interestingly, NYDIG offered some hints that Bitcoin wages may actually become a secular trend beyond recent headlines, especially among younger workers. According to the press release:

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

NYDIG is not alone in identifying Millennials and especially Gen Zers as prime candidates to take crypto wages to the next level. In fact, a global staffing firm’s recent analysis of 100,000-plus employee contracts suggested that crypto salaries appear to be on the rise, especially among “borderless” remote workers, and especially residents of certain regions with high inflation or those with unstable banking systems, such as such as Latin America.

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

Younger generations are still eager

On this last point: In November, a deVere Group survey reported that a third of millennials and half of Generation Zers would be happy to receive 50% of their salary in Bitcoin and/or other cryptocurrencies. This survey was conducted when crypto market prices rose sharply. Does the financial advisory group believe that younger generations are still eager to receive their wages in cryptocurrencies after a 50% plus decline in crypto prices since then?

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“Younger generations are still keen to receive wages in cryptocurrencies as they have grown up with technology. They are “digital natives,” Nigel Green, CEO of deVere Group, told Cointelegraph, and more comfortable using cryptocurrencies than older generations. Moreover, “they know that 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 stacking Bitcoin regularly on a monthly basis,” Danny Scott, CEO and co-founder of the UK’s CoinCorner LTD, which has held Bitcoin on its balance sheet for a few years and offers employees a BTC salary option, told Cointelegraph. “If anything, we’ve received more inquiries in recent months from companies wanting to pay their employees 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 their entire salary in cryptocurrency.” Yet that survey of 2,000 US adults was conducted on May 6, 2021 and May 25, 2022, when BTC was still near $30,000. The price was at ~$23,000 on August 1 for comparison.

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Adam Poulton, CEO of Get Paid In Bitcoin – a Bitcoin payroll solutions platform based in Australia – challenged the notion that the #PaidinBitcoin phenomenon was completely immune to market price influences. “Our business, although 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 sees an influx of new customers during bull markets and a drop in transactions during bear markets. That’s an issue we’re still actively trying to address in the longer term.”

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

Trends higher in 2022

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

In the six-month period from January 1 to June 30, ~5% of all payments from the Deel platform monthly were taken in crypto, up from just ~2% in the previous six-month period. Dan Westgarth, chief operating officer of Deel, told Cointelegraph that he expects this growth to continue, with 8% in the second half of 2022 a real possibility. Moreover, this trend is largely “market agnostic”, i.e. not correlated with the market price of crypto.

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However, there is considerable variation by geographic region. 67 percent of Deel’s crypto salary 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 only 2%.

How to explain these differences? Three different groups are driving this trend, in Westgarth’s view. First is investment types, looking for a good long-term investment. The second group are teleworkers who live in countries with aging banking systems. And the third group are remote workers in countries with high inflation, such as Turkey or Argentina.

Many of the banking systems in the LATAM region are old, and the cost of payment transfers to these countries is time-consuming and expensive, Westgarth explained. Crypto transfers are comparatively fast and cheap, so workers take part of their entire salary in crypto and often convert it to local currency right away. Employees in places like Argentina can fall into all three groups, such as investors who live in high-inflation areas with old 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 any payment in BTC, although this remained the leading option, followed by USD Coin (USDC) (29%), Ether (ETH) (14%), Solana ( SOL) (8%) and Dash (DASH) (2%).

When asked about the surprisingly high USDC component, which was more popular than Ether, Westgarth suggested that the stablecoin could be the first choice in some countries with high inflation where trust in the government is low and exchange rates are not always transparent. However, these workers 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. Anyway, “We let the workers choose how they want to be paid – local currency, crypto or USDC.”

Green sees sustained growth in crypto wages over the next five years as Bitcoin becomes more widespread in general. When this happens, “liquidity will continue to rise, and volatility will continue to ease.” It’s all part of continuing a decade-long trend, and Green expects that “most large companies will offer workers a crypto payment option within five years.”

Taking care of your own BTC

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

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“Our platform is aimed at people who care for their own Bitcoin,” Poulton told Cointelegraph. “From our point of view, the actual asset and delivery of Bitcoin is extremely important as it reduces the counterparty risk of having to rely on other parties for the secure delivery of your value into the future.”

Others ask why employees want to be paid in Bitcoin when there is almost nothing you can buy with it. “I understand that ‘brick and mortar’ adoption of Bitcoin acceptance is still very low,” Poulton replied, even though Bitcoin-enabled credit cards have proliferated. Nonetheless:

“By simply receiving some of your salary in Bitcoin and keeping it in a secure wallet, one saves for the future and prepares one’s family for a potentially future inflationary environment.”

Another interesting aspect of the “crypto as salary” movement is gender participation. The proportion of female Bitcoin wage earners has been increasing, according to Poulton. “Our female representation was in the range of 7-8%,” but with the firm’s new business-to-business platform, “it’s now more like 38-40%.”

Macro trends favor growth

Other employment trends also favor crypto salaries. In many industries, there is a “high demand for talent and a shortage of available candidates,” according to Deel’s hiring report, so “more companies are looking outside higher-cost countries to find quality talent.” The 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 dramatic increases in labor contracts in places like Georgia, Armenia and Belarus in the EMEA region, Kyrgyzstan, Azerbaijan and Thailand in Asia-Pacific (APAC), and Trinidad and Tobago in LATAM, Westgarth noted. 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 among senior executives, scalability and regulatory concerns.”