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Is it worth accepting salaries in cryptocurrencies? Experts reveal 4 disadvantages

3 min read

Driven by the desire for greater flexibility, the explosion in popularity of freelance work ushered in the era of the “crypto worker.” Which means that traditional salaries are exchanged for cryptocurrency payments.

Cryptocurrency payments have gained significant traction recently as a way for freelancers to get paid. A recent survey revealed that 93% of freelancers (out of a sample of 2,500 respondents) worldwide want to be paid in cryptocurrencies. Specifically, stablecoins.

This surge in interest stems from the frustration many face with currency exchange issues. Transaction fees and currency conversions make working with international clients a challenge. Cryptocurrencies offer a potential solution by simplifying payments and eliminating these obstacles.

Here are the expert insights to explore the potential pitfalls of crypto salaries.

KYC and AML rules pose challenges

Cryptocurrency salaries seem to be in fashion. Still, Felix Shipkevich, founder of the New York-based law firm Shipkevich PLLC, warns that they can be more complicated than traditional methods.

The main culprit? The notorious volatility of cryptocurrencies. Unlike a fixed salary, Bitcoin and other similar currencies can fluctuate in value. This means freelancers may see their hard-earned income dwindle before they convert it into usable cash.

And although Bitcoin’s price is on the rise, skeptics warn that its future remains a gamble. Shipkevich indicated that stablecoins offer more stability. But its value is still tied to potentially risky reserve assets.

The lawyer also said that freelancers would need to navigate a technical learning curve. They would have to understand digital wallets, blockchain, and the intricacies of crypto transactions.

Additionally, ever-changing cryptocurrency regulations put tax compliance at risk. In short, these headaches can vary by location and may require expert accounting help.

Furthermore, KYC (know-your-customer) and AML (anti-money laundering) regulations are becoming stricter. This requires freelancers to go through the hassle of identity verification and transaction limits. In short, crypto wages come with a great deal of complexity.

Tax law could burst your bubble

Daniel Krupka, director of research at Coin Bureau, said that unlike the simplicity of fiat taxes, cryptocurrencies are a drag on the equation.

“While it’s easy to calculate how much you owe in taxes with fiat payments, it’s less easy with cryptocurrency payments, especially volatile cryptocurrencies like BTC,” he said.

Is it a capital gain, a regular income or something else entirely if you hold Bitcoin and its value skyrockets? Krupka emphasizes that tax headaches, especially with volatile cryptocurrencies, may outweigh the initial appeal of crypto payments for freelancers.

Obstacles in Crypto-to-Cash Conversions

Daniel Fayemi, backend engineer at Bitvavo, said converting cryptocurrencies to cash (off-ramping) can be challenging depending on location. For example, in the Netherlands, strict regulations limit the amount of money you can transfer from a wallet without providing personal details.

Stablecoins outperform cryptocurrencies for payments

Matthew Leising, co-founder of DeCential Media, said stablecoins offer an excellent option for freelancers familiar with cryptocurrencies. And they are relatively simple for newcomers to set up.

Stablecoins also offer an opportunity to earn a respectable yield in the crypto economy, such as the current 5.1% on USDC on Coinbase. However, a potential challenge arises with the freelancer’s bank. It may be hesitant to facilitate crypto transactions, especially when converting earnings to U.S. dollars or other fiat currencies, Leising said.

According to Rebecca Liao, CEO of Saga, the good news is that lawmakers and presidential candidates are increasingly embracing cryptocurrencies. Rebecca believes that once the US enacts comprehensive cryptocurrency legislation, freelancers will largely receive payments in stablecoins.

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.