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Bankchain Briefing: Should we take the crypto paycheck seriously?

  • Cryptocurrency payroll is gaining popularity among employers and employees alike.
  • This week, we explore the viability of the crypto paycheck.

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Bankchain Briefing: Should we take the crypto paycheck seriously?

In November 2020, Deel, a payroll and compliance platform for international remote teams and independent contractors, became one of the first companies to launch a cryptocurrency payroll service.

Deel Crypto was launched in partnership with Coinbase, and it allows contractors who use the Deel platform to withdraw their paycheck in a cryptocurrency of their choice, as long as they have a Coinbase account. Deel claims the service allows near-instant withdrawals with low processing fees, while offering the security and efficiency of blockchain technology.

“We’ve seen a growing trend of workers deciding to withdraw their whole salary, or a portion of it, in crypto,” Alex Bouaziz, founder and CEO of Deel, told Tearsheet. “Since enabling crypto paycheck withdrawals in November of 2020, we’ve seen an almost 10% increase month-over-month in people wanting to be paid in cryptocurrency.”

Initially, Deel Crypto only supported withdrawals in bitcoin, ether, and XRP. But due to popular demand, it also added support for USDC and Solana in December 2021.

Bouaziz says Deel Crypto helps workers bypass the SWIFT network for international payments, eliminating fees as well as compliance documentation requirements. However, Coinbase still charges a 1.5% ‘provider fee’ for crypto salary withdrawals. Additionally, USDC payments have a variable fee of 1%, while Solana payments cost an extra 1.5%.

Deel’s corporate clients include the likes of Coinbase, BlockFi, and Rarible. The firm recently raised $425 million in a Series D round led by Coatue Management to reach a valuation of $5.5 billion.

Deel may be one of the bigger firms to get in on the crypto paycheck, but it’s certainly not the only one. A number of companies have started to offer similar services recently, including Bitwage, BitPay, and Strike.

And just last week, institutional bitcoin broker NYDIG announced the launch of a Bitcoin Savings Plan to let employees of participating companies get paid in bitcoin. The firm says this perk will allow employers to attract and retain the best and brightest young talent.

“We know how hard it is for companies to attract top-notch talent. That’s never been truer than it is today,” said Patrick Sells, chief innovation officer at NYDIG. “A NYDIG Bitcoin Savings Plan can help employers stand out from the pack while providing their employees with a critical tool for protecting their financial futures.”

Employees can choose what percentage of their salary gets converted to bitcoin by NYDIG’s platform. Bitcoin traded and held by employees as part of this service is stored in NYDIG’s cold storage system, and doesn’t incur any transaction or storage fees.

Companies that have already signed up for NYDIG’s Bitcoin Savings Plan include Q2, MVB Bank, Vantage Bank, and sustainable bitcoin mining firm Iris Energy. NYDIG is also offering the service to its own employees.

Demand for the crypto paycheck is growing, particularly among Gen Z and young millennials. In a recent survey, NYDIG found that 36% of employees under 30 said they would like to receive a portion of their pay in bitcoin. And nearly one in three of those employees said that when choosing between two identical jobs with different employers, they would choose an employer that helps them get paid in bitcoin.

Crypto payroll may be gaining popularity among the international remote working community, but it has a long way to go and many hurdles to overcome in the coming years.

The first and most obvious challenge is that of volatility. Even the bigger and relatively “stable” cryptocurrencies like bitcoin and ether are prone to massive price shifts in the span of a few months. This makes them highly unpredictable and unreliable as a means of regular payment, particularly for people who rely on their salary for paying rent.

Crypto regulations vary widely in different parts of the world, and cryptocurrencies are taxed differently from country to country. As of November 2021, 42 countries have placed implicit bans on cryptocurrencies, while 9 countries have banned crypto altogether. Restrictive regulations make it very difficult to establish crypto payroll services on an international scale.

Furthermore, crypto is not sufficiently integrated with existing banking systems. Although DeFi platforms are growing, most existing financial tools like credit cards don’t work with crypto, limiting usability.

Companies at the forefront of digital payments will need to contend with these challenges before they can begin to successfully replace traditional payroll on a large scale.

Chart of the week: ‘Regular’ gifts are so 2021

As crypto continues on its journey to mainstream adoption, it’s starting to play a bigger role not just in people’s financial portfolios, but also in their personal lives.

With Valentine's Day just around the corner, digital investment platform Definder surveyed its customers to learn about their Valentine's Day preferences. This is what it found:

  • 86% of people would prefer crуptо over traditional gifts, despite the recent market drop. This finding is in line with NBC News naming crypto as “the hottest holiday gift this year”.
  • 61% of people are considering giving crypto as a Valentine’s Day present.
  • 31% have already given crуptо as a present at some point.

Ilia Obraztcov, CEO of Definder, says he’s fascinated to see young consumers being responsible and conscious gift-givers this year. “Instead of spending money on disposable presents, we see a huge demand in crypto as a new hot gift, which shows how financially aware these new consumers are,” he said.

“I wish I’d known this earlier myself – I’ve spent 8 wonderful years with my wife, and she could have bought herself a house if I had given her, say, 10 bitcoin instead of a huge bouquet for our first Valentine's Day together.” 

What we’re reading

  • DriveWealth is adding crypto to take on Coinbase’s ‘unsustainable’ fees (CNBC)
  • Crypto firm Wirex launches in the US, almost a year later than planned (The Block)
  • Google Cloud hiring team of blockchain experts (CoinDesk)
  • Crypto exchange FTX hits $32 billion valuation (CNBC)
  • Fidelity kickstarts process to list metaverse and crypto company ETFs (The Block)
  • Crypto infrastructure company Fireblocks nearly quadruples valuation to $8 billion in six months (TechCrunch)
  • SEC approves BSTX to operate first securities exchange utilizing blockchain technology (Crowdfund Insider)
  • Facebook’s embattled crypto project is dying (The Verge)

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