Can businesses pay salaries in stablecoins? It depends on local labor and tax law. On the tax side, the tax authorities in the United States, the United Kingdom, and Australia all treat wages paid in crypto assets as taxable employment income, and employers must withhold based on the value at the time of payment. On the labor law side, U.S. federal regulations require that statutory wages be paid in cash or in a negotiable instrument payable at par, and there is currently no official guidance on whether stablecoins can meet this requirement.
Is It Legal to Pay Salaries in Stablecoins?
Take the United States as an example. The regulations implementing the Fair Labor Standards Act (29 CFR 531.27) provide that statutory wages, including overtime pay, must be paid in cash or in a negotiable instrument payable at par, and 29 CFR 531.35 further requires that wages be paid to the employee finally and unconditionally. The U.S. Department of Labor’s public FAQs do not address crypto assets or stablecoins, so businesses need to obtain legal advice before switching the statutory wage portion of pay to stablecoins.
Note also that the tax authority rules described below explain how crypto wages are taxed; they do not mean that local labor law permits wages to be paid in crypto.
How Are Stablecoin Salaries Reported and Withheld?
In the United States, IRS Notice 2014-21 states that the medium in which remuneration is paid generally does not affect whether it constitutes wages; wages paid in virtual currency are subject to federal income tax withholding based on fair market value, are subject to FICA and FUTA, and must be reported on Form W-2. The IRS’s digital asset FAQs also state that compensation an employer pays to employees in digital assets is wages, measured at its U.S. dollar value when received.
In the United Kingdom, HMRC considers crypto assets received as employment income to be “money’s worth,” and exchange tokens for which trading arrangements exist to be “readily convertible assets.” Employers must withhold income tax and Class 1 National Insurance contributions through PAYE based on a best estimate of their value.
In Australia, the ATO provides that where there is no effective salary sacrifice arrangement, the employee is treated as receiving ordinary salary or wages, and the employer must meet its PAYG withholding and superannuation obligations based on the Australian dollar value of the crypto assets paid. Where there is an effective arrangement, the payment is a fringe benefit, measured at its value when provided.
How Do Employees and Contractors Differ?
The difference lies in who pays the tax. For employees, U.S. employers must meet the withholding and W-2 reporting obligations described above. For independent contractors, IRS Notice 2014-21 provides that virtual currency received for services is included in self-employment income at its U.S. dollar fair market value on the date of receipt, and contractors pay self-employment tax themselves. The full process for paying overseas contractors and suppliers is covered in how businesses make global payouts with stablecoins.
What Records Should Businesses Keep When Paying?
The rules in all three jurisdictions are based on the local currency value at the time of payment. The IRS requires measurement at the U.S. dollar value on the date of receipt; the ATO requires recording the Australian dollar market value of the crypto assets; and HMRC requires employers to submit a Full Payment Submission (FPS) through Real Time Information on or before the day of payment. Businesses therefore need to keep, for every salary payment, the payment time, the token amount, and the corresponding local currency value.
Stablecoins are usually pegged to a fiat currency, but they can also depeg, in which case the value employees actually receive will deviate from their salary amount. The payments themselves should also go through a transfer approval workflow so that every salary payment is reviewed before signing.
Conclusion
To pay salaries in stablecoins, businesses should first confirm whether labor law where the employee is located permits it, then withhold under local tax law based on the local currency value at the time of payment and keep records. Safeheron’s MPC Wallet-as-a-Service provides businesses with MPC key management and a policy engine.
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