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Carrie Kirby at CoinDesk has a piece up in which she reflects on getting paid entirely in Bitcoins.
She first notes that the few workers who do get paid in Bitcoin overwhelming respond that it is a net positive for them. That said, most if not all such people opted into Bitcoin payout over fiat currency, so there might be some bias there.
A Bitcoin earner has a few options. The first is the “immediate cash-out,” as assistant director of the Bitcoin Foundation said of the practice (she has first-hand knowledge). This requires selling Bitcoins on a regular basis.
Any Bitcoins not sold from the salary payment effectively become investments, which have been good ones for the last few months. This also allows for diversity in one’s holdings.
Other Bitcoin earners can try to pay for everyday things with Bitcoin as much as possible. One Utah couple is documenting their experiences living for 90 days on Bitcoins, and they have managed to book flights and hotels with the digital currency. There is a significant degree of difficulty, but life can be largely paid for in Bitcoin at this point.
San Francisco’s CoinBase pays its employees in Bitcoin, and one employee even pays his rent in it.
Dining out with friends gets a little tough, though, without fiat currency. This usually requires the Bitcoin holder to transfer funds after someone covers his or her part of the check.
Paying taxes is where this gets murky. Holland had to file her taxes last year after getting paid exclusively in Bitcoins. The IRS treats the dollar value of Bitcoin at the time of payment as taxable; if the value later goes up, that becomes a capital gain. This all requires extra record keeping.
But employers who pay in Bitcoin do seem to issue W2s and report salaries.
Then, there is the issue of price fluctuation. To put it shortly, Bitcoin salary earners just need to have the stomach for that kind of thing. It seems to come with the self-selection bias.
As the CoinBase employee put it: “I make and lose a thousand dollars on a regular basis due to the price fluctuations. For me, it’s more fun that scary.”
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