When New York City Mayor, Eric Adams, announced he was taking his first three paychecks in the form of Bitcoin, it might have been a publicity stunt, and one that backfired as Bitcoin prices took a nosedive, but it has highlighted a new means of employee compensation that is potentially on the horizon.
Mayor Adams was not alone in this stunt. The mayor of Miami also took compensation in the form of Bitcoin and has been pushing to pay city employees in the digital currency as a bid to make Miami a cryptocurrency hub, similar to New York’s Adams.
But, if you dig a little deeper, you’ll see that things aren’t as clear cut as these mayors are making it out to be. For one, the City of New York did not purchase Bitcoin and pay the mayor. Instead, Adams transferred his paycheck and into a “digital wallet” with Coinbase, a cryptocurrency exchange, and then bought Bitcoin and another cryptocurrency, Ethereum.
Why did Adams make a big deal out of being paid in cryptocurrency only to get a traditional paycheck? PR aside, it’s due to the federal Fair Labor Standards Act, which prohibits employers from paying base salaries in anything other than a fiat currency, that is, a currency issued by a sovereign government.
Things like bonus compensation could be distributed in a non-fiat currency, such as Bitcoin or Doge Coin, but experts recommend making it clear in writing to employees wanting said payment to understand that these currencies are subject to market forces and potential huge losses, like those which Adams experienced. Additionally, employees should know that cryptocurrency is subject to the same IRS codes that govern securities and similar financial instruments.
