How to Pay In Crypto: Guide for Employers

Crypto payroll—compensating employees or contractors with digital currencies like Bitcoin, Ethereum, or stablecoins—is reshaping global workforce management. Over 25% of multinational companies now integrate cryptocurrency into payroll systems, driven by demand from remote teams, tech-forward industries, and regions with volatile local currencies. This shift reflects a broader trend toward financial agility, providing businesses with a competitive edge in attracting talent and streamlining operations.

Globalization and the rise of decentralized workforces have amplified the need for borderless payment solutions. Traditional cross-border transactions often encounter delays, high fees, and challenges associated with currency conversion. Crypto payroll bypasses these barriers by using blockchain networks to facilitate near-instant settlements, minimize intermediary costs, and simplify compliance for distributed teams.

Reports indicate that despite its volatility, 36% of employees are open to receiving wages in crypto. The demand for decentralized payment flexibility is particularly robust among Web3-native professionals and younger generations prioritizing digital-first financial tools.

Offering crypto options helps employers stand out in competitive talent markets while future-proofing global compensation strategies. With this guide, employers can optimize their payroll operations to pay employees in cryptocurrencies, rather than traditional means.

Is it legal to pay employees in crypto?

The legality of cryptocurrency payroll varies significantly across jurisdictions, which creates a complex environment for global employers.

In the United States, federal labor laws require minimum wage and overtime payments to be made in U.S. dollars or equivalent negotiable instruments, as mandated by the Fair Labor Standards Act (FLSA). However, discretionary compensation like bonuses or contractor payments may be eligible for crypto distribution, provided they exceed federally mandated thresholds. State-level regulations add complexity—New York and Texas explicitly require wages to be paid in USD, while others permit crypto for non-mandatory benefits if employees consent.

Internationally, approaches range from permissive to prohibitive. Countries like El Salvador recognize Bitcoin as a form of currency, while China and Egypt enforce strict bans. Even in crypto-friendly nations, labor laws often require base pay in fiat currency, with third-party services like Coinbase facilitating post-payroll conversions to digital assets. Volatility remains a critical concern, as fluctuating crypto values could inadvertently push wages below legal minimums.

Given these nuances, employers should consult legal and tax advisors to navigate reporting requirements (e.g., IRS Form W-2 for U.S. workers) and ensure compliance with local employment laws. Proactive due diligence mitigates risks in this rapidly evolving regulatory environment.

Who can be paid in crypto: Employees vs. contractors

Navigating crypto payroll requires understanding how worker classification impacts compliance. In short, employees face stricter regulations than contractors in most jurisdictions. Below is a breakdown of key considerations for each group.

Employees: Structured compliance

Employers must prioritize local labor laws when compensating full-time or part-time employees. Base salaries typically require fiat currency to meet minimum wage standards, but supplemental earnings (e.g., bonuses, commissions, or stock options) may be distributed in crypto.

For example, a German software engineer’s contract could specify a euro-denominated base salary with performance-based Ethereum rewards. Employers remain responsible for tax withholdings and reporting the fair market value of crypto at the time of payment.

Contractors: Flexible agreements

Independent contractors and freelancers often have more flexibility, as crypto payments can be negotiated if clearly defined in service contracts. A blockchain developer in Nigeria might invoice $10,000 per month in USDC, thereby bypassing local banking delays.

Global payroll platforms streamline tax documentation by locking exchange rates at the time of payment, while contractors assume responsibility for declaring their income. This approach is suitable for short-term projects or roles tied to Web3 ecosystems, where cryptocurrency is a preferred payment method.

In either case, this “hybrid payroll” model enables global businesses to offer both crypto and traditional payments to their international teams. This model “effortlessly blends time-honored financial practices with the cutting-edge payment protocols of the crypto economy, giving businesses the agility and confidence to navigate new financial waters,” says Hugo Finkelstein, Hybrid Payroll Advocate at Rise.

Step-by-step: How to pay employees or contractors in cryptocurrency

Implementing crypto payroll requires a structured approach to ensure compliance, security, and transparency. Below is a practical roadmap for employers navigating this process, from legal checks to post-payment documentation.

Step 1: Determine crypto payment eligibility

Begin by verifying local labor laws in each jurisdiction where workers operate. When paying international employees, many countries mandate base salaries in fiat currency, while supplemental earnings like bonuses may be crypto-eligible. Contractors typically offer greater flexibility, as crypto payments are permissible if outlined in service agreements. Classify workers correctly to avoid misclassification penalties. Confirm tax obligations, as employers must withhold taxes in fiat equivalents for employees, whereas contractors often self-report.

Step 2: Choose which cryptocurrencies to use

Prioritize stability and employee preference. Stablecoins like USDC or USDT are ideal for global payroll due to their 1:1 peg to fiat currencies, which minimizes volatility. While Bitcoin or Ethereum may appeal to Web3 talent, their price fluctuations complicate wage valuation. Ensure your chosen cryptocurrency aligns with regional acceptance and platform compatibility.

“Web3 professionals expect remuneration that aligns with the fluidity and immediacy intrinsic to blockchain environments,” Finkelstein adds. “Hybrid payroll platforms satisfy this demand, offering seamless integration of cryptocurrency with conventional fiat currencies, thus tailoring to a multifaceted financial reality.”

Step 3: Get employee or contractor consent

Obtain written consent specifying payment terms, including the cryptocurrency type, exchange rate methodology, and disbursement schedule. When paying international contractors with crypto, clarify how volatility will be managed. Some platforms lock exchange rates at the time of payment to prevent disputes. Include wallet address verification protocols to reduce errors.

Step 4: Set up a crypto wallet and payment platform

Businesses should use custodial wallets or managed payroll providers to help automate conversions and compliance. Employees and contractors require secure wallets with multifactor authentication; hosted options, such as Coinbase, simplify onboarding for cryptocurrency newcomers. Avoid storing large crypto reserves in hot wallets to mitigate cybersecurity risks.

"If you have a larger business that deals with more money or plan on holding your cryptos as an investment for a long time, you might choose a good cold storage crypto wallet instead," advises Jordan Bishop, Financial Expert at StartUp Nation. “Cold wallets refer to wallets that are not connected to the internet and, therefore, are much less vulnerable to hacking,” he adds.

Step 5: Calculate payment and convert fiat to crypto

Convert fiat wages to crypto using locked exchange rates at the time of payment to ensure fair valuation. For example, a $5,000 contractor invoice might be converted to 5,000 USDC if the rate is 1:1. Certain payroll providers automate this process, reducing manual calculations. Stablecoins streamline this step by eliminating mid-payment value shifts.

Step 6: Send crypto payment securely

Verify wallet addresses before initiating transactions—a single typo can result in irreversible losses. Use platforms with blockchain explorers to track payments in real-time and provide recipients with transaction IDs for confirmation. Automated tools and payroll providers can batch-approve payments, reducing administrative overhead.

Step 7: Maintain accurate payroll records

Document all transactions, including dates, conversion rates, and wallet addresses, to simplify tax reporting and audits. Integrate cryptocurrency payroll software with accounting systems to automatically categorize payments and generate compliance-ready reports. Retain records for at least seven years to meet global regulatory standards.

Tax, reporting, and compliance considerations

Navigating tax and compliance requirements is critical when implementing crypto payroll, as regulations vary significantly across regions. Below is a detailed overview of key considerations for employers managing global teams.

U.S. tax obligations

In the U.S., the IRS treats cryptocurrency as property, not legal tender. This classification creates specific reporting responsibilities:

Income tax. Employers must calculate the fair market value of crypto payments in USD at the time of disbursement. For example, a $5,000 bonus paid in Ethereum requires converting the cryptocurrency to its USD equivalent on the payment date, which determines the value reported as ordinary income on the employee’s W-2 or contractor’s 1099.
Payroll taxes. Social Security, Medicare, and unemployment taxes must be withheld and paid in U.S. dollars, even if wages are distributed in cryptocurrency. Employers are responsible for converting crypto to fiat to meet these obligations.
Form 1099-DA. Starting in 2026, brokers facilitating crypto transactions must report payments using this new form, which details gross proceeds, wallet addresses, and asset types. Non-custodial platforms (e.g., wallets that don’t hold assets) are exempt, thereby reducing the reporting burdens for decentralized payroll providers.

These rules apply regardless of an employee’s location, making accurate conversion rates and documentation essential.

Global compliance challenges

International teams face a fragmented regulatory landscape:

Fiat mandates. Many countries require base salaries to be paid in local currency. Some limit crypto to supplement earnings or apply to contractor agreements. For instance, a German employee could receive a euro-denominated salary with a crypto bonus, but the base pay must comply with national labor laws.
Stablecoin treatment. Jurisdictions vary in how they classify stablecoins, and employers must align payment methods with local definitions to avoid penalties. Singapore treats USDC as property, subject to capital gains tax, while Brazil views it as a foreign currency, requiring conversion to BRL for tax reporting.
Anti-money laundering (AML). Transactions exceeding $10,000 may trigger reporting under Financial Action Task Force (FATF) guidelines. Employers using crypto for large payouts should verify recipient identities and maintain audit trails.

Key IRS updates (2024 regulations)

Recent U.S. regulatory changes clarify three critical areas:

Non-custodial platforms. Providers offering wallet software without custody services are exempt from being classified as a broker. This simplifies payroll processes for employers using decentralized tools.
Stablecoin clarity. Unlike tokenized securities, stablecoins like USDC avoid dual tax classification, reducing compliance complexity for cross-border payments.
Basis reporting delay. Employers are not required to track the cost basis of crypto acquired before 2026, easing transitional challenges for early adopters.

Proactive due diligence, including audits of payroll practices and consultations with tax professionals, is vital to navigating this evolving landscape. Employers should prioritize platforms that integrate IRS-ready reporting tools and support multi-jurisdictional compliance.

Leverage crypto for strategic global compensation

Velocity Global simplifies crypto payroll for global employers, offering compliant payment solutions across 185+ countries. By integrating cryptocurrency payments with multi-currency payroll processing, Velocity Global ensures adherence to local tax regulations and labor laws, enabling businesses to pay international teams efficiently while mitigating compliance risks. Explore our platform to streamline both crypto payroll and traditional payments in a single, centralized system. Contact Velocity Global to learn more.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

Share via:

Topics:

Payroll