Yesterday’s Bitcoin Investment Company NYDIG announced it is the latest company to allow payment of part of someone’s salary in cryptocurrency. It is also worth exploring other motivations for using digital currency for salaries, innovations already available, and their impact on business adoption of digital currencies, including stablecoins.
In the case of NYDIG, the goal is to promote Bitcoin as a savings and investment tool. He gives a case study of former NFL rookie Drew Brees, whose companies Everbowl and StretchZone allow staff to receive part of their salary in Bitcoin, if they choose.
Coinbase announced a similar plan in October last year.
Beyond the investment thesis
Some of the reasons to use a digital currency for payroll include:
- allow staff to “invest”
- crypto companies want to maintain their operations in the crypto world
- conventional SMEs want to save money for multinational teams
- exploit innovations such as real-time hourly payments.
Non-crypto businesses using stablecoins for payroll could encourage broader adoption of new digital currency payment systems by businesses, starting with SMBs. And will help pave the way for a future with central bank digital currencies (CBDCs).
Tech companies, including those outside of the blockchain industry, tend to have a higher proportion of remote employees spread across the globe. And depending on the country, compensation costs for the self-employed or employees can be high. Therefore, paying with stablecoins seems attractive.
There are also issues beyond cost. Anti-Money Laundering (AML) procedures are a particular challenge for SMEs. It is not uncommon for companies that pay freelancers or employees in Eastern Europe to encounter problems, sometimes having their bank accounts blocked. Using stablecoins can save you a lot of hassle.
We have written before about the challenges of anti-money laundering. Think of a bank fined for AML violations that wants to appear proactive. Who are they more likely to be strict with? A blue chip client or an SME? AML procedures are still in place using a digital currency, but there is a different set of players.
Besides the fight against money laundering, in terms of costs and efficiency, even domestic payments can be a challenge in some countries.
What is the impact ?
Once companies start using stablecoins for salaries, they are already inside the “blockchain system”. This means that they could start holding funds in stablecoins or possibly cryptocurrency. And as digital currencies become more widely accepted, they will consider paying other costs with digital currency, including paying bills for the physical trade of goods.
However, using Ethereum is not a realistic option for most, due to its outrageously high transaction fees. Payments should either be via an Ethereum or Bitcoin sidechain (or layer 2) or pretty much any other blockchain where costs are low.
What is already available
Considering the amount of money in the crypto industry, there is already considerable activity in the payroll space. They vary from a basic wallet, to more sophisticated layered features, to state-of-the-art streaming apps.
Earlier this month, the Australian blockchain startup Chrono.tech raised a $30 million funding round. It positions itself as offering blockchain HR solutions, including a freelance site. It also provides PaymentX for payroll, which includes a system to prompt employees to sign up for a wallet. Additionally, it has an Australian dollar stablecoin for local payments.
This brings up a general point about stablecoins. Beyond the US dollar, the liquidity of stablecoins in other currencies is thin and the range of vendors is not as deep. For example, for the euro, Tether is the only one with a significant stablecoin. Given that he’s been censured for misleading claims about his support assets, he’s not an ideal option for payroll.
Last year golden finances introduced its Mass Pay solution for payroll which, by name, is essentially a bulk payment offering. It mainly supports Bitcoin and Ethereum networks, including stablecoins. Despite the high Ethereum transaction fees, it allows you to bundle up to 500 payments into a single transaction.
Bitwage is one of the original companies offering payroll payment services. Like Gilded Finance, it doesn’t seem to offer any particular payroll integration, so a company uploads a spreadsheet showing who to pay and how much.
Other money streaming solutions are state of the art. Zebec Protocol unveiled its Zebec payroll, which could allow you to pay hourly staff by the second with the funds dripping into their wallets. If you’re old school, you might think that’s undesirable. But most people also want to work tomorrow, so they’re always motivated. And there is a good chance that this type of real-time payment will become the norm in five or ten years. Other streaming solutions include MeanFi and Superfluid.
Going forward, it’s not just payments that can be broadcast. The future is programmable money. So when digital currency hits an employee’s wallet, they can have rules for setting some aside for savings, automatically paying bills, or transferring money to their vacation wallet.
Most of these crypto solutions are just crypto payment apps with limited or no integration with payroll or accounting systems. But it’s still early. While cryptocurrency companies aim to persuade big corporations to use crypto for their cash flow, using digital currency for payroll could be the real Trojan horse.