As cryptocurrencies are becoming more mainstream, so too are the types of applications and transactions which use bitcoin and other digital currencies in lieu of traditional payment methods.
Not long ago, Bitwage - the bitcoin payroll and international wage payment service -announced that it will be launching services in the UK.
Bitwage is a platform which facilitates employers, employees, workers and freelancers to pay or receive wages (or part thereof) in bitcoin and also in other currencies (including GBP, USD, Euros and others) or even in commodities such as gold and silver.
The purpose behind it is efficiency. It allows for quick and effective payroll by employers by taking out banking process and cheque clearing delays through leveraging bitcoin and blockchain technology, while still allowing them to send currency.
Employees and freelancers, on the other hand, can enjoy the benefit of electing to receive their remuneration via alternative international currency, bitcoin or commodities. The service, in theory, means the investor is partially shielded from the volatility of currency markets and bitcoin valuations.
It is essentially a way to create a periodic system of investment, without having to set up and manage your own funds. It could be beneficial for the undisciplined saver who would like to know that part of his or her wages will be set aside to accrue, but who doesn’t have the knowledge, skills or financial savvy to create and maintain other types of investments or trade.
This has come to the UK market at an opportune time. With impeding Brexit, workers resident in the UK but working in the EU (and vice versa) and who may be sending money back home, need more flexible ways to receive their money in a currency of their choice. They may also be looking to set aside savings and investments in more creative ways.
From an employer’s perspective, the flexibility of such new technologies can also be a unique selling point. Beyond the freelance or part-time gig economy, the modern workforce is looking for more flexible ways to work. Adaptable payment structures will be a natural consequence of that. With the rise in freelance working among the millennial generation, employers also need to stay ahead of the curve. Demonstrating capability by offering these payment options shows that the business listens to the market and it could be an attractive benefit in a recruitment package.
For those businesses that don’t have a large workforce but which trade across borders, these types of platforms could still prove useful. Once the UK leaves the EU, it could get much harder for businesses to make payments outside of the UK and they will be vulnerable to value leakage through large scale or multiple small transactions involving a central bank and currency exchange, with associated costs and commissions.
But as with any new processes, these arrangements don’t come without risk. There is no regulation in the UK on digital currencies, so anyone choosing to transact in this sphere does it on risk against the various scams and inventive ways[1] that unscrupulous coders are using to siphon bitcoin away from unsuspecting traders.
Additionally, recipients of bitcoin need to be aware of the nature of these assets, and how properly to report them. Bitcoin is considered widely to be currency, but following rulings in other jurisdictions, some territories have determined that bitcoin should be treated as property, meaning businesses who receive bitcoin should account for capital gains earned on them.
Individuals also need to be aware that any proportion of wages that they elect to be received as bitcoin should be differentiated from their usual monetary income and depending on their tax and residency status, will need to be treated accordingly. It also goes without saying that workers who sign up for these types of accounts and who therefore receive bitcoin or commodities such as gold and silver are effectively setting up investments and their accounts could grow or diminish in economic value, affecting their actual returns over any tax year.
It is important therefore that employers, workers and business consider the implications of switching from traditional money bank accounts to trading in this way and get appropriate legal and accounting advice.
The market value of bitcoin has seen a real upsurge in recent months as bitcoin and other types of cryptocurrencies gain more mainstream media attention. So much so, that the market value of bitcoin is seeing heights which go beyond the peaks seen just before their value crashed in 2015 following the headline-grabbing high-profile Mt Fox and other large-scale scams. These scams showed how risky and volatile the cryptocurrency market can be, and in particular how scammers can always find a way to make commodities disappear, even those which are secure and remove the third party handler.
But the excitement of emerging technologies and the thrill of investment can be enticing; it is inevitable that more and more businesses and individuals will start to experiment with the technologies, services and transaction mechanics available in this sector.
We recommend that anyone seeking to adopt these unindustrialised facilities contacts us first to discuss the options and identify any risks or potential adverse consequences of adopting these new and broadly unregulated practices. Email us today at This email address is being protected from spambots. You need JavaScript enabled to view it. or call us on 020 7792 5649. Our team of specialist lawyers have the experience required to help you receive bitcoin safely or settle any dispute that may have arisen as a result of a digital, bitcoin or cryptocurrency scam.
