Paying wages with cryptocurrency, the pitfalls that 90% cryptocurrency workers are falling into
Written by: Rao Weitong
A while ago, a friend of mine came to me and showed off that he had found a very good job. I said, "Brother, you are rich..." After repeated questioning, he finally confessed that he was actually working for an overseas Web3.0 project in China. He had a high degree of freedom at work, and his boss sent him directcryptocurrency The salary is in USDT, and all wages are received in full and are very generous.
I shook my head after hearing this. This kind of wealth is unbearable.
Paying wages with cryptocurrency is becoming the norm
As cryptocurrencies are popular around the world, more and moreBlockchainThe company began to pay salaries in cryptocurrency (with USDT as the main currency). After all, the benefits of doing so are there:
On the one hand, for cross-border payments, cryptocurrencies make international payments fast and cheap, reducing costs while eliminating the need to deal with cumbersome foreign exchange procedures. Usually, crypto projects agree with employees on a specific amount of USDT for monthly salary. When paying wages, the finance department only needs to transfer the money on the chain and pay a small amount of gas fee, and it can be sent with one click and quickly received, just like "Musk tweets";
Cryptocurrency, on the other hand, is aBlockchainUnlike traditional banknotes and coins, cryptocurrencies rely on complex encryption technology to ensure that payment transactions are extremely transparent andSafetyAll transactions are recorded on the chain, so there is no need to worry about shady operations. When the finance department pays the salary, it gives the employee the transfer hash, and the employee can thenBlockchainUse hashes on the browser to find specific data. Everything is open and transparent, and no one can play tricks.
Although it seems that there are many benefits to using cryptocurrency for salary payments... in our country, this could get you into big trouble.
Legal risks are always there
For both Web3.0 project owners and ordinary workers, using cryptocurrency as a means of wage payment may bring a series of unexpected legal risks.
Chinese law does not recognize virtual currency as salary payment
First of all, Chinese law does not recognize these virtual currencies, and the RMB is the right way. Specifically, the Chinese government is cautious about cryptocurrencies and their supervision is quite strict. There is a saying in the currency circle: "The leeks can't be cut completely, and they will grow again in the spring breeze", but in China, the "spring breeze" of cryptocurrencies is not easy to blow.
So, on the question of "paying wages with cryptocurrency", the answer is: Sorry, this is not feasible in Chinese law. According to the "Law of the People's Bank of China", "Interim Provisions on Wage Payment" and "Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation", the RMB is the only legal tender, and virtual currencies such as Bitcoin, Ethereum, and Tether are not legal tender. Virtual currencies do not have the same legal status as legal tender and should not and cannot be circulated in the market as currency.
At the same time, because most Web3.0 projects are overseas, they will also involve foreign exchange management-related issues. In this regard, my country's attitude towards cross-border transactions of cryptocurrencies is also strict supervision, and using it for payment may be a thunder. China's State Administration of Foreign Exchange has strict control over foreign exchange flows, and the anonymity and decentralized nature of cryptocurrencies can easily be mistaken for money laundering tools. Recently, the Shanghai Procuratorate issued the "2023 Shanghai Financial Procuratorate White Paper". Combined with the illegal financial crimes released in the past three years, it is inevitable that a large number of money laundering methods such as currency exchange and cross-border transfer of assets will be found. In this case, the corresponding supervision intensity is also escalating year by year.
What impact will paying employees with currency have on them?
The project is placed abroad, and development and technology are handled by domestic personnel. This is the current status of most Web3.0 projects. So the question is, are you sure that a labor relationship is established between the company and you?
According to my country's Labor Contract Law and related regulations, only foreign companies that are legally registered in China and have obtained a business license are considered employers under China's labor law and can establish labor relations with them. In addition, the labor relationship can only be judged by referring to the specific agreement on the cooperation model in the contract terms. Xiaobai NavigationIn the common employment model of the Web3.0 industry, contracts are often not signed. Even if a contract is signed, it is a simple nominal company or consulting agreement. In this case, once a dispute arises in the payment of wages in currency, employees need to provide other evidence to prove the existence of a de facto labor relationship, otherwise the labor relationship cannot be confirmed, and their own rights and interests naturally cannot be legally protected.
Of course, you may say that you are sure to establish a labor relationship with the company, then new problems will arise:
Unstable income
Although the mainstream means of payment is stablecoins (such as the USDT mentioned above, because it is anchored to the US dollar and has small price fluctuations), some projects will use other types of cryptocurrencies.TokenThe characteristic of cryptocurrencies is that the price fluctuates greatly. The salary you just received today may shrink by 20% tomorrow, and your quality of life will be like a roller coaster. Imagine that you were the "Wang Duoyu" in the cryptocurrency circle yesterday, but became the "Jiucai Ge" today. Who can stand such a life?
Tax troubles
Most crypto projects do not have domestic entities and will not pay taxes for their employees. Therefore, most employees need to declare and pay taxes on their own. According to my country's current tax laws, the income generated by individuals transferring virtual currencies such as Bitcoin may involve paying personal income tax. However, cryptocurrency transactions are complicated and tax declaration has become a problem. "It is better to earn less than to violate the rules." If the tax problem is not handled well, no matter how much you earn, you will have to pay it back.
Difficulty in protecting rights
The Labor Law requires that wages be paid in RMB, so paying wages in cryptocurrency may not be protected by law. If you are owed wages or bonuses, you may not be able to provide evidence, and it will be difficult to protect your rights in the event of a dispute.
Safetyrisk
After employees obtain virtual currency, they often need to exchange or trade it into legal currency through illegal channels before they can use it in daily situations. However, when withdrawing funds, there is uncertainty about where the counterparty's money comes from. Once illegal funds such as gambling and fraud are received, it is very likely to cause the card to be frozen. After working hard for a long time, the money is not kept, and there are even criminal risks such as suspected aiding (assisting information network criminal activities) and concealing (covering up and concealing criminal proceeds).
What impact will paying wages in cash have on companies?
Compliance and tax risks
Companies using cryptocurrency to pay wages are likely to cause compliance issues, which may result in fines, penalties, and even affect normal operations. The tax policy for cryptocurrencies is also unclear, and companies may need to pay back taxes and fines. The accuracy of tax records is also difficult to guarantee. Imagine that the finance department is busy all day, but in the end they are fined for cryptocurrency payments. Isn’t this kind of "increasing revenue and reducing expenditure" a bit of a loss?
Risk of back pay
The practice of paying wages with cryptocurrency violates legal provisions. For companies, if they use cryptocurrency to pay wages, once a dispute arises, the wages will often be deemed invalid because cryptocurrency is not a legal tender (as mentioned above), and they will face the risk of having to pay additional wages. In the end, they lose both their money and the money.
Safetyrisk
The "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" clearly states that "there are legal risks in participating in virtual currency investment and trading activities. Any legal person, non-legal person organization or natural person who invests in virtual currency and related derivatives and violates public order and good morals will have their relevant civil acts invalid, and they will be responsible for the losses caused thereby; if they are suspected of disrupting the financial order and endangering financial security, the relevant departments will investigate and deal with them in accordance with the law." When a company holds a large amount of virtual currency and pays wages, if it operates improperly, there may be a risk of disrupting the financial order and being held accountable for relevant legal responsibilities.
Case Analysis
On May 20, 2019, Shen joined an Internet company and signed a labor contract with it. The labor contract stipulates that Shen will work on an irregular basis, with a monthly salary of 50,000 yuan, 14 months of salary throughout the year, a target performance bonus of 50,000 yuan/half year before tax, and a target annual bonus of 50,000 yuan/year before tax. During the performance of the labor contract, after deducting social security and provident fund, Shen's monthly salary was actually paid in the form of 2,574 yuan + virtual currency USDT, of which 2,574 yuan has been paid until October 2020, and USDT has been paid until September 2020. On October 17, 2020, Shen resigned for personal reasons, and believed that a certain Internet company had defaulted on his salary, performance bonus and overtime pay, so he applied for arbitration to the Labor and Personnel Dispute Arbitration Committee. Dissatisfied with the arbitration award, Shen filed a lawsuit with the court.
The court's effective judgment held that the act of paying wages with virtual currency violates the law and should be deemed invalid. The employer should pay labor remuneration to the employee in a timely and full manner in RMB in accordance with the labor contract and national regulations; the fourteenth salary and bonus agreed upon by both parties should also be paid in RMB.
The focus of the dispute in this case is whether the employer can pay wages to employees in virtual currency. As mentioned above, Chinese law does not recognize virtual currency as wages. According to Article 5 of the Interim Provisions on Wage Payment, wages should be paid in legal tender; Article 16 of the People's Bank of China Law stipulates that the legal tender of the People's Republic of China is the RMB; the Notice on Further Preventing and Dealing with the Risks of Virtual Currency Transaction Speculation stipulates that virtual currency is not legal tender. Therefore, virtual currency should not and cannot be circulated in the market as currency, nor can it be paid as wages.
This case also involves the issue of back pay by the company, which is one of the risks of paying wages in virtual currency described above. In this case, the company needs to bear the adverse consequences, and the act of paying wages in virtual currency is deemed invalid. The company should pay full labor remuneration to employees in RMB in accordance with the labor contract and national regulations.
Conclusion
Although cryptocurrency salary payment has certain advantages, it does face many legal risks under the current legal and regulatory environment in China. Both companies and employees should carefully consider and abide by laws and regulations to avoid legal disputes and economic losses. For us, understanding these risks will help us protect our rights and interests and make more informed choices.
The article comes from the Internet:Paying wages with cryptocurrency, the pitfalls that 90% cryptocurrency workers are falling into
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