There have been several reports of high-profile sports stars earning part of their salary in cryptocurrency in the past few months. Lionel Messi, for example, received a large amount of “fan tokens” upon his arrival at Paris Saint-Germain. More recently, Green Bay Packers quarterback Aaron Rodgers announced in October that he would be accepting a portion of his salary in Bitcoin.
Would you be interested in receiving cryptocurrency as part of your salary? According to a recent survey from The Ascent, approximately 40% of respondents said they’d want some of their wages via cryptocurrency, and 31% said they’d think about getting their full compensation this way. This demonstrates how cryptocurrencies are becoming more widely accepted and are perceived by many as having more potential value than ever before.
Let’s look at the phenomenon of being paid in cryptocurrency, why there is traction behind it, and the tax implications.
A Cultural Movement
Professional athletes are idolized – they have a massive influence on the way many people live their lives. A huge star, such as Lionel Messi, making a statement by being paid in cryptocurrency could impact a fans’ view on the entire blockchain-enabled phenomenon. It is also a way for famous sportspeople to connect with fans, showing themselves as leaders by believing in the technology wholeheartedly.
A salary in digital currency is not uncommon within the world of cryptocurrency itself. For example, many prominent traders pay their employees this way. The Japanese firm GMO Internet Group also offered its employees the chance to receive salaries in crypto this year. Additionally, freelancing is a sector particularly suited to crypto payments due to workers being based worldwide and needing a universal system with limited transactional fees.
Crypto Salary Considerations
The main advantage of being paid in crypto is the efficiency and cost-effectiveness of the transfers – international payments become so much easier with cryptocurrency. Those who choose to be paid in crypto also achieve financial liberation from the traditional centralized financial systems and can feel that their identity is more secure.
However, it is also essential to be aware of the market’s volatility and that any salary would depend on the particular coin’s market valuation. For example, if you were being paid $500 as a freelancer, you would receive a portion of whatever the coin’s value was on that day, and it can vary dramatically. One way of avoiding this volatility would be accepting payment in stablecoins, where the value is fixed to a regular currency such as the dollar.
In terms of taxation, in the US, the Internal Revenue Service (IRS) requires you to determine the difference between how much the cryptocurrency was acquired for and how much it was sold for, as this value is subject to capital gains tax just like any other investment. The IRS has publicly stated that they are taking a stricter stance on crypto compliance. To date, there is a lack of harmonization on the treatment of cryptocurrency as income in Europe. For example, in Italy, Netherlands, or Portugal no tax is imposed on capital gains from cryptocurrency earnings. Either way, it’s important to report your crypto earnings properly.
There’s no doubt that receiving part of your income in crypto is a freeing and cost-effective strategy, provided that you stay on top of the tax implications. You can give yourself a big opportunity to earn extra income by holding onto some crypto and potentially watching its value grow. With more and more famous athletes choosing to have a percentage of their earnings paid in crypto, there’s no reason why it can’t become a more common phenomenon for workers in any industry.
For advice on how to utilize your crypto investments, check out Delchain’s advisory service here.