At the end of January, Eric Adams, the new mayor of New York, created the buzz by announcing that he had received his first salary in bitcoins and in ethereumsin accordance with the campaign promise made a few months earlier to collect his first three emoluments in cryptocurrencies.
“In the United States, but also in New Zealand, Australia, Switzerland, Japan and El Salvador, the legal framework allows employees to be paid in cryptocurrencies, and a growing number of companies are taking the plunge”, notes Julien Niquet, president of Epsor, a company that supports employers in the valuation of employee savings and retirement. Lawyer specializing in matters of compliance for actors in the blockchain at Deloitte Société d’Avocats, Céline Moille wants to put this enthusiasm into perspective. “In fact, it seems that companies pay a very small part of the salary in cryptos in order to limit the risk attached to the volatility of these assets, she points out. As for the mayor of New York, he actually received his first salary in dollars, to then convert it into cryptos…”
Banned in France
In France, this practice remains, a priori, prohibited. “The Monetary and Financial Code and Article L3241-1 of the Labor Code stipulate that wages must be paid in fiduciary money that is legal tender in France, in cash, or by crossed check, or by transfer to a bank or postal account.recalls Céline Moille. Considered as digital assets, cryptocurrencies therefore do not fall under the legal status of currencies. The payment of salary in cryptos on an e-wallet is therefore similar to a benefit in kind, like everything that is not paid in fiduciary manner.
The problem is the same for profit-sharing agreements, employee savings, bonuses or benefits. “All these schemes are based on a remuneration base including starting income and total salaries, and which is always based in euros, with maximum amounts imposed by the Labor Code, notes the lawyer. However, with the very high volatility of cryptocurrencies, it seems almost impossible to respect these maximum percentages.
If the payment of salaries in cryptos is beginning to spread in certain countries, it is because the practice has certain advantages. “Kraken and BTC Markets, two American and Australian bitcoin and cryptocurrency exchange platforms, use it as a recruitment argument to attract young and pro-crypto recruits, says Julien Niquet. In France, the Future of pay study carried out in 2020 by ADP also showed that 35% of millennials would be open to paying their remuneration in cryptocurrencies.
For Céline Moille, the technology itself also has a number of arguments. “Beyond the marketing buzz, the speed of transfers, the security provided by transactions via the blockchain, which are all traced, validated and timestamped, and the low cost of transactions could be of interest to companies, believes the lawyer. In particular those which have employees all over the world and which seek to optimize the cost of payment of salaries, the current procedures proving to be long, complex and expensive.
According to the company Gilded, the payment of remuneration in cryptocurrencies would reduce the transfer time by 96% and save 75% on the fees charged on a classic transfer. “The payment of salary in cryptos could also be used as a lever to increase the remuneration of its employees, adds Julien Niquet. Since its creation, the value of bitcoin has increased by more than 12,000%. Offering employees to receive part of their remuneration in digital currency could attract and retain all those who aspire to the prospect of quick earnings.”
But this extreme volatility is also the main Achilles heel of these digital assets. The crash of the Luna cryptocurrency and its stablecoin UST observed in mid-May 2022 is a reminder of the extent to which investing in this type of market is a high-risk practice.
“Between November 2021 and today, bitcoin has lost almost 60% of its value, recalls Julien Niquet. Paying part of the salary in cryptos would therefore make employees take a significant risk. It is therefore understandable why employers are reluctant to offer this method of remuneration. As far as I am concerned, as a business manager, I would not go, even if the practice was authorized.
Céline Moille shows herself to be less affirmative. “If the legal framework evolves to allow the payment of wages or premiums in cryptocurrencies, relying on the forty players currently regulated in France such as Coinhouse, Mon livret C or the Caisse des dépôts et consignations, it is a safe bet that companies will invite themselves over the water in the dance, predicts the lawyer. Those who accept payments in cryptos could also keep part of them to distribute them in the form of benefits in kind to their employees.
But before arriving there, it will also be necessary to remove obstacles other than legal or tax. The question of compliance will have to be settled, for example, because banks continue to take a dim view of the flows between cryptos and euros, and generally ask where these funds come from, the fight against money laundering obliges…
“Today, someone who would be paid their salary in bitcoins could not go shopping, or pay their rent or their taxes with it, adds Celine Moille. He would be obliged to convert them with a regulated player. As long as it is impossible to use these digital assets throughout the ecosystem, uses will have difficulty in becoming more democratic.”