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According to a market estimation, by 2030, cryptocurrency payment apps are forecast to grow about 16% at a CAGR. There are more than 425 million cryptocurrency users worldwide, and the number is continuously increasing.
As of October 2023, the global cryptocurrency market cap stands at $1.1 trillion, with Bitcoin's market cap of $531 billion comprising approximately 40% of this total. Many international workers now want to get paid in Bitcoin, Ethereum, or any other cryptocurrency instead of traditional fiat money.
The rise of Web3 technologies and the growing acceptance of digital currencies have driven individuals to explore this new way of compensation. Before choosing crypto as your mode of payment, you may want to know all the pros and cons of it. This blog will help you explore the advantages and disadvantages of receiving payments in Bitcoin, the methods to do so, and the key players in this space.
Advantages of getting paid in Bitcoin
1. Decentralization and autonomy
One of the primary advantages of getting paid in Bitcoin is its decentralized nature. Unlike regular money, cryptocurrencies aren't controlled or influenced by any government or big financial institution. This means you have more control over your money without worrying about sudden rule changes or the value of your currency dropping. It's like having more freedom and control of your finances.
2. Global accessibility
Bitcoin transactions transcend geographical boundaries. It allows users to get payments from anywhere in the world. This feature is particularly beneficial for remote workers and freelancers who work from around the globe and expect to receive payments on time. The Bitcoin payment ecosystem allows users to get payment without the delays and fees associated with traditional cross-border transactions.
3. Blockchain security
By utilizing blockchain technology, Bitcoin transactions are highly secure. Blockchain technology ensures that all transactions are safe and almost impossible to hack. Additionally, Bitcoin transactions do not require disclosure of personal information so that users can enjoy a certain level of anonymity.
4. Potential for appreciation
Cryptocurrencies are well-known for their volatile nature. Their prices go up and down a lot, which can be both good and bad. In the case of value appreciation, there's a chance of growing your wealth and making a lot of money. Bitcoin has shown a historical tendency to appreciate in value over time. If someone receives payments in Bitcoin, they may benefit from the potential increase in its value.
5. No additional transaction charges
Getting paid in bitcoins facilitates you to dodge a lot of extra charges. Regular banks and money transfer services usually charge various fees, such as transaction and conversion fees. These charges make financial transactions, especially international ones, pretty expensive. Crypto payments allow you to skip these costs. So, getting paid in bitcoins is a smoother and more cost-efficient way, especially when you work globally.
6. 24/7 accessibility
The cryptocurrency market operates 24/7. So, users can send and receive Bitcoin at any time. This constant accessibility can be essential to businesses and individuals engaged in global transactions across different time zones. Therefore, bitcoin payments can be processed instantly—no matter where you’re sending or receiving funds.
7. Innovative business models
For businesses, offering crypto payment option opens the door to innovative business models. It helps to attract a tech-savvy customer base. This can position the business ahead in the changing money world, maybe even making it stand out from the competition.
Disadvantages of getting paid in Bitcoin
The value fluctuation of Bitcoin can be a double-edged sword. While there is a chance of value appreciation, there is also a significant depreciation risk. So, individuals receiving payments in Bitcoin may also experience fluctuations in their earnings. And this value change can happen very fast.
2. Limited acceptance
Though the acceptance of Bitcoin is growing, it is still not universally recognized as a form of payment. Some individuals, shops, and other businesses may still prefer traditional currencies. That will be a practical limitation of receiving payments in Bitcoin in certain situations.
3. Complicated taxation
If you are new to cryptocurrencies, it can be tricky to handle them. You may face difficulties figuring out how to keep your Bitcoin safe and manage it securely. You also have to learn about the tax rules also well. Depending on your local laws, earning in bitcoin may have complicated tax implications. It is like entering a new world with its own set of rules. It may take some time to get used to.
4. Regulatory uncertainty
The rules and laws about cryptocurrencies are continuously changing, which can be confusing for users. It means the legal and tax laws might differ in different places, making it difficult for those receiving Bitcoin payments to determine what is and is not permitted.
How to get paid in Crypto?
1. Set up a digital wallet
The first step of getting paid in crypto is to create a digital wallet. These wallets are meant to receive and hold your cryptocurrencies and act as a personalized bank account for your digital assets.
2. Share your public address
Once your wallet is set up, you can share your unique Bitcoin address with the payer. This alphanumeric string serves as a special identifier for your wallet and enables the payer to send Bitcoin directly to you.
3. On/off ramp options
When getting paid in crypto, you need a way to cash out into a bank account, as crypto is not yet truly mainstream. Here, an on/off ramp platform can easily help you buy or sell cryptocurrencies using national currencies. These platforms allow you to convert your crypto earnings into local currency and pay your bills with merchants that don’t accept cryptocurrency yet.
4. Track your payments
It is important to maintain a detailed record of all your cryptocurrency transactions. A crypto portfolio tracker can help you with it. A tracker can automatically update your crypto earnings and expenditures, ensuring you stay organized and have a clear overview of your finances.
5. Understand tax obligations
Have a clear understanding of the tax implications of receiving payments in cryptocurrency. Local laws and regulations regarding digital assets may vary. So, you must be updated with your tax obligations to avoid surprises.
Who gets paid in Bitcoin?
Remote workers and freelancers
People who collaborate with clients worldwide, such as freelancers and remote workers, like to get paid in crypto. The flexibility and global accessibility of crypto make it an attractive option for them. Cryptos allow them to receive payment without the delays and fees associated with traditional banking systems.
As the demand for decentralized applications (dApps) rises in the future of Web3, there's a growing need to hire a blockchain developer. Professionals working in blockchain development and decentralized technologies often prefer receiving payments in crypto as the native currency of the platforms they work on.
Tech and crypto enthusiasts
People who are deeply involved in the tech or fond of cryptocurrency may prefer to receive payments in Bitcoin. They have a strong belief in the future potential of digital currencies.
Tax implications when getting paid in Crypto
While receiving payments in crypto, it is essential to be aware of the tax implications associated with such transactions. Many jurisdictions consider cryptocurrencies as taxable assets. If you are getting payment in Bitcoin, you may need to report your earnings for tax purposes. Here are some instances when your crypto earning is taxed:
Receiving Cryptocurrency as Income:
When you receive your payment in crypto, you have to report it as regular income. The amount you report depends on how much the cryptocurrency was worth when you got it.
Using Cryptocurrency for Transactions:
If you use cryptocurrency to buy things, it will be considered as selling it. Then, you have to calculate and inform the tax people whether you made money or lost money from that transaction.
Buying and Holding:
You don't have to pay taxes when you buy and keep crypto without selling them. But if you want to sell, trade, or use your cryptocurrencies, you must pay taxes.
When you "mine" cryptocurrency, the coins you get will be considered as a paycheck. So, when you receive the value of those coins, that will be treated like regular income. And your earnings from crypto mining will be taxable.
Even gifted and inherited cryptocurrencies are also subjected to tax. The owner needs to pay taxes.
You need to keep track of all your crypto transactions - when you buy or sell crypto, how much you get or spend, and who was involved. This helps you report the right information for your taxes.
Consulting with Tax Professionals:
Figuring out cryptocurrency taxes can be complicated. It is a good idea to get help from experts like tax professionals or accountants. They know the ins and outs of digital assets and can guide you on what you need to report. They make sure you follow the rules and help you navigate through the tax landscape.
Getting paid in Crypto comes with multiple benefits and some challenges as well. While features like decentralization, global accessibility, and maximum security attract more users to get paid in cryptos, individuals need to consider its potential downsides as well. In the modern business landscape, many individuals prefer crypto payments. To give your business a competitive edge, you must consider paying in crypto.
Gloroots can help businesses to make their payment in crypto. It offers a fully automated and efficient system to pay workers, and maintain every financial detail and tax responsibility.
With efficient payroll management, Gloroots will also take care of payment security and compliance.
To better understand paying in cryptocurrency, contact the Gloroots team now!