Meanwhile, there’s also a growing number of high-profile individuals who want to be paid in crypto.
Crypto on the balance sheet
Take for instance electric-car maker Tesla and MicroStrategy, a software developer. The companies together own about 169,000 Bitcoin, nearly 78% of all Bitcoin owned by publicly traded companies, writes Tristan Bove in a new Fortune report.
“MicroStrategy alone makes up for more than half of this amount, holding 121,000 Bitcoin, equal to $3.5 billion,” Bove writes. “Even in the wake of the crypto carnage, MicroStrategy has no intentions to back down from its Bitcoin bets.”
For example, MicroStrategy CFO Phong Le recently echoed the company’s founder and CEO Michael Saylor’s notable defense and praise for Bitcoin on his Twitter feed.
“Our strategy with Bitcoin has been to buy and hold, so to the extent we have excess cash flows or we find other ways to raise money, we continue to put it into Bitcoin,” Le told the Wall Street Journal last week.
Tesla CEO Elon Musk’s stance on crypto has been crystal clear for some time. In a SEC filing in March 2021, Musk noted his additional title of “Technoking,” and said CFO Zach Kirkhorn would also be known as “Master of Coin.”
Tesla is standing firm in retaining its crypto holdings. “In its Q4 earnings report, released on Jan. 26, the company revealed it hadn’t sold off any of its Bitcoin during this year’s ‘crypto winter’ and currently holds $1.26 billion in Bitcoin,” Bove writes.
Although the Bitcoin downturn continues, a growing number of individuals, like athletes and politicians, want to be compensated in crypto. For example, New York City Mayor Eric Adams’ first paycheck in office, received this month, was converted into Bitcoin and Ethereum.
The New York Post estimates Adams may have lost more than $1,000 of his first check due to the crypto crash.
If crypto is risky on the balance sheet, wouldn’t compensation in crypto be complicated? I asked Alan Levine, partner and co-chair of the executive compensation and employee benefits department at the law firm Morrison Cohen. “There are definitely some things that are problematic,” Cohen said.
“Until Congress or the IRS weighs in, it’s going remain difficult to pay people in cryptocurrency, even if they want it. You’re not getting cash. You’re getting, basically property, like a share of stock that rises and falls with the course of the market.”
Is it even legal to pay base salaries in crypto? “Under the Fair Labor Standards Act, you have to pay in cash or negotiable instruments,” Cohen explained. “It’s unclear yet whether Bitcoin or other cryptocurrencies satisfy that rule. So, it’s risky from an employer’s perspective.” Can you pay people bonuses in cryptocurrencies?
“The answer is yes,” Cohen said. But it would have to exclude overtime, which is subject to the Fair Labor Standards Act, he said.
Cohen noted that in 10 states— California, Delaware, Georgia, Illinois, Maryland, Pennsylvania, Michigan, New Jersey, Texas and Washington—you must pay an employee a base salary in cash. Crypto as compensation isn’t an option in those locations.
Another aspect to consider: “how does the employer satisfy the employee’s withholding obligations? The IRS only takes cash,” he said.
It seems companies contemplating putting Bitcoin on the balance sheet or paying employees in crypto have a lot to think about.
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