The rise of cryptocurrency, particularly Bitcoin (BTC), has reshaped financial transactions and created opportunities to rethink traditional remuneration structures. While originally conceived as a decentralised digital currency, Bitcoin and some of its alternatives have found a place in employment remuneration – particularly in technology-centred industries.
Dr Chris Blair, CEO of 21st Century, provides an in-depth look at the evolution of "cryptomuneration".
Bitcoin was introduced in 2009 by an individual or group known as Satoshi Nakamoto. Initially, it was a niche payment method for emerging advocates for digital currency and those involved in blockchain-related fields.
However, as Bitcoin gained widespread acceptance and institutional interest, its use expanded into broader areas, including employee remuneration. Early adopters of cryptocurrency for payments, such as blockchain start-ups, wanted to align their remuneration structures with a more forward-thinking approach.
A significant milestone occurred in 2014 when companies like Overstock.com and Bitwage began offering Bitcoin payment options to employees. Over time, legislative frameworks and financial infrastructure supporting cryptocurrency expanded, making it easier for employers to use crypto as part of payroll. The COVID-19 pandemic accelerated digital payment adoption, further driving interest in cryptocurrency-based remuneration.
Several models have emerged for remunerating employees using cryptocurrency, each reflecting the diverse needs and preferences of employers and employees:
1. 100% cryptocurrency payments
Some organisations pay employees entirely in cryptocurrency, bypassing traditional fiat currencies. This model is more common among blockchain and crypto-native firms, where employees are often crypto-savvy and willing to weather the risks of market volatility. The advent of stablecoins (e.g., USDT, USDC) allowed for payment in stablecoins, which removes the volatility issue and is becoming more prevalent.
2. Hybrid payments
Hybrid models allow employees to receive a portion of their salaries in cryptocurrency and the remainder in fiat currency. This approach mitigates the volatility risks while allowing employees to benefit from the potential appreciation of cryptocurrencies.
3. Employee choice vs employer choice
In some instances, employees are given the autonomy to choose their preferred payment method—crypto or fiat. Alternatively, employers may mandate cryptocurrency payments, especially when operating in crypto-centric industries.
4. Choice of cyptocurrencies
While Bitcoin is the most common cryptocurrency used for remuneration, other currencies like Ethereum, stablecoins and lesser-known altcoins are also options. Stablecoins are particularly attractive as they minimise volatility risks by being pegged to fiat currencies.
These models highlight the flexibility and customisation cryptocurrency payments offer, although they require robust payroll systems and adherence to regulatory requirements.
The adoption of cryptocurrency for employee remuneration varies significantly across countries, influenced by regulatory environments, cultural attitudes toward crypto and levels of technological advancement.
1. North America
The United States leads in cryptocurrency adoption for remuneration, driven by its vibrant tech ecosystem and relatively favourable regulatory stance. Companies like Coinbase and BitPay actively use crypto-based payroll systems. Canada has also seen growing interest, with an emphasis on compliance with tax and labour laws. It is estimated that 7% of employees in this region are receiving a portion of their salary in cryptocurrency.
2. Europe
In Europe, countries such as Estonia and Switzerland have embraced cryptocurrency remuneration. Estonia, known for its digital-first approach, has integrated crypto into its e-residency program. Switzerland, home to "Crypto Valley," offers a supportive environment for blockchain enterprises. It is estimated that 34% of employees opting for crypto salaries were based in the Europe, Middle East and Africa (EMEA) region.
3. Asia
Asian nations show mixed adoption rates. Japan and South Korea are at the forefront, supported by progressive crypto regulations. Conversely, countries like China, despite its blockchain ambitions, have imposed restrictions on cryptocurrency use, limiting its adoption in payroll. Like North America, it is estimated that 7% of employees in this region are receiving a portion of their salary in cryptocurrency.
4. Latin America and Africa
In regions with high inflation and unstable currencies, such as Venezuela and Nigeria, cryptocurrency remuneration offers a hedge against economic volatility. Employers use stablecoins to provide consistent value to employees, addressing concerns around hyperinflation. A report by global hiring firm Deel indicated that 52% of employees receiving part of their salary in cryptocurrency were from the Latin America region. In Argentina, the number of companies paying their employees partly in crypto increased by 340% over the last year, making it the country with the highest percentage of crypto-paid employees globally.
Globally, tech-savvy industries, start-ups and freelancers are more likely to embrace cryptocurrency-based payments. Adoption remains limited in traditional sectors due to regulatory challenges and the complexity of integrating cryptocurrency into conventional payroll systems.
Cryptocurrency remuneration can take different forms based on organisational strategy and employee roles.
1. Fixed pay
The use of cryptocurrency for fixed salaries is relatively rare. Traditional remuneration structures predominantly utilise fiat currencies to ensure stability and compliance with wage and hour laws. Cryptocurrency's volatility and regulatory uncertainties make it less suitable for fixed remuneration. Employees relying on fixed salaries often prioritise stability, making hybrid or fiat payments more attractive or the use of payment in stablecoins.
2. Incentives
Cryptocurrencies are increasingly popular for incentive payments. Short-term incentives (STIs), such as performance bonuses or project-based rewards, align well with crypto's speculative nature. The inherent volatility of cryptocurrencies poses challenges for their use in STIs, as fluctuations in value can affect the perceived fairness and effectiveness of the incentive. Employers considering this approach must carefully weigh these factors.
Cryptocurrency-based Long-term incentives (LTIs) often involve vesting schedules, where employees receive crypto rewards over time, aligning with organisational retention goals. LTIs, such as stock-like crypto tokens or profit-sharing schemes, leverage blockchain's transparency and can foster employee loyalty. This model is particularly prevalent in start-ups and blockchain firms, where employees are remunerated with native tokens or equity-like crypto assets. In the technology and blockchain sectors, some companies have adopted token-based awards as part of their LTI programs. These awards function similarly to traditional equity-based remuneration, offering employees tokens that may appreciate over time. Token incentive plans often include various award types, such as fully vested tokens, restricted tokens, and restricted token units (RTUs).
Cryptocurrency remuneration offers several advantages over traditional fiat payments; namely, cryptocurrencies eliminate the need for currency conversions and reduce transaction fees for cross-border payments, making them ideal for global workforces; for employees in underbanked regions, cryptocurrency offers an alternative to traditional banking systems, enabling direct access to earnings through digital wallets; cryptocurrency transactions settle faster than traditional banking processes, especially for international payments, which can take days; in countries with unstable currencies, cryptocurrencies—particularly Bitcoin and stablecoins—serve as a hedge against inflation, preserving the value of employee earnings; for blockchain and crypto-focused companies, paying employees in cryptocurrency aligns with their mission and demonstrates a commitment to decentralisation, and in certain jurisdictions, cryptocurrency payments may offer tax benefits or deferrals, though this depends on local regulations.
While the benefits are compelling, challenges persist. Regulatory uncertainty is a significant barrier, with varying interpretations of cryptocurrency as income or assets. Price volatility, tax compliance, and the need for specialised payroll systems further complicate adoption.
Looking ahead, several trends and developments could shape the future of cryptocurrency-based remuneration:
Increased Regulation and Standardisation - as governments establish clearer guidelines for cryptocurrency transactions, more companies will adopt crypto-based payroll systems with greater confidence.
Integration with Decentralised Finance (DeFi) - the integration of payroll systems with DeFi platforms could enable innovative remuneration models, such as staking employee earnings to generate passive income.
Adoption of Stablecoins - stablecoins are likely to dominate cryptocurrency remuneration due to their price stability, bridging the gap between crypto and fiat currencies.
Blockchain-Based Identity and Payroll Systems - blockchain technology can streamline payroll management by ensuring transparency, security, and immutability of records.
Mainstream Adoption in Traditional Sectors - as cryptocurrency gains acceptance, traditional industries may explore hybrid or incentive-based models to attract and retain top talent.
Cryptocurrency-based remuneration is a transformative approach that reflects the ongoing evolution of work and financial systems. While currently niche, its adoption is expanding, driven by technological advancements and the need for global, efficient payment methods. Companies must navigate regulatory complexities and volatility risks while embracing the benefits of transparency, efficiency, and accessibility.
As blockchain technology matures, cryptocurrency remuneration is likely to become more prevalent, shaping the future of work and redefining how employees are remunerated in an increasingly digital world.
This article is based on research conducted by Dr Chris Blair of 21st Century, one of the largest remuneration consultancies in Africa. Contact info@21century.co.za for any further information.
Written by:
Dr Chris Blair, CEO of 21st Century, cblair@21century.co.za
B.Sc. Chem. Eng., MBA – Leadership & Sustainability, PhD – Leadership & Management
