#35 - How to pay your employees in crypto

• Connect with Rodrigo on LinkedIn

• Visit Mode's website

• Mode Blog | Get paid in Bitcoin with Mode

• Lano Blog | Pay your employees in Bitcoin

• Paysafe | Over half of crypto-natives would rather get paid their salary in cryptocurrency

How to pay your employees in crypto

with Rodrigo Rosa, Head of Partnerships at Mode

Sandra Redlich  00:08

It's looking quite sunny where you are. So the first question I always ask is, where are you joining from today. So, where are you joining from today?

Rodrigo Rosa  01:39

Hey Sandra. Yes, I am usually based out of London. But I have managed to come up to Lisbon in Portugal for a few days. So that's where I'm dialing in from, sunny Portugal.

Sandra Redlich  01:54

Escaping the London rain. Is that that stereotype still going on?

Rodrigo Rosa  01:58

Absolutely. Although ironically, last week, we had terrible weather here. It looked rather nice in the UK, you know, with the jubilee celebrations. But it's very nice now.

Sandra Redlich  02:07

That always happens. It always happens that way. And I gave a quick little introduction before, but just in your own words for our listeners, what is it that you do?

Rodrigo Rosa  02:17

I work at a company called Mode, which is a UK based tech company. We are basically a crypto app, offering a multitude of products that have helped people to both start and evolve their crypto journey across many touchpoints. I look after partnerships, which essentially involves working with many different types of companies to help them deliver and distribute products. So for example, we've developed a partnership with Lano, to help companies to enable their clients to offer their employees the ability to get paid in crypto, more specifically Bitcoin in the UK. So that's the sort of partnerships that I work with.

Sandra Redlich  02:58

Yeah, that's super interesting. So I'm guessing you're at the forefront and the best person to ask - why would companies want to offer employees the opportunity to be paid in cryptocurrency or specifically Bitcoin?

Rodrigo Rosa  03:13

Absolutely, yeah. So today, we're seeing a lot of changes in the workplace. And I think you've gone through a lot of these in previous podcasts, we're seeing some really big themes emerge. And so you're seeing distributed teams worldwide, you know, companies looking to employ talent wherever they're based, kind of beating the talent crunch, you know, not just hiring locally. You're seeing other themes, like, you know, working from home, and, you know, employees having flexibility to do at least part of the time from home or desired location. You know, and you see many companies like Airbnb, you know, who have implemented permanent remote working for, you know, all of employees going forward. And many companies in the last few years, you know, even from inception, companies like Toptal, you know, being 100% remote businesses. So, what we're seeing is a new era in a workplace where, especially if you look at the younger generations, they're expecting sometimes even demanding a lot more flexibility, you know, is a change in mindset that was driven by tech industry, enabled by technology, like zoom and collaborative software. And really accelerated during the pandemic. With crypto adoption, the adoption is growing at an incredible pace. And cryptocurrencies, you know, they're gaining increasing relevance in the economy, you know, and we as mode, we see salaries being paid in cryptocurrencies, as one of the next emerging big themes in the workplace. You know, workers to demand more work flexibility, as well as financial flexibility through innovative salary options. And, you know, what we're seeing is many signs that demand for crypto salaries is really here. I think we saw it happening first last year when we saw, for example, #PayMeInBitcoin began trending on Twitter lastr year.

Sandra Redlich  05:14

Yeah, I remember that.

Rodrigo Rosa  05:16

We also saw many high profile politicians like the mayor of New York City, the mayor of Miami, you know, that have taken salaries in crypto. In addition to that, you know, you've seen countless numbers of high profile athletes, you know, like the top pick in the NFL draft was, you know, receiving, I think it was the salary completely in crypto, or part of it, NBA players and so on. You know, and there are also many people worldwide that are effectively already taking their salaries in crypto through basically, you know, like a split paying part of the salary into, you know, crypto exchanges or crypto wallets. So, and actually, one thing worth noting is, there are a few pieces of research on this topic as well that really support the kind of growing demand for this. So just to name one, there was a study carried out by a company called Paysafe, which is a essentially a payments company. They asked 2000 people in both the UK and the US. And they basically did some research to ask, you know, are they interested in... Would they like to get paid in crypto? Now, an astounding 55% said they would like to get paid in cryptocurrency. And within the sort of younger generation in the 18 to 24 year old brackets, they found that 60% of respondents wanted to get paid in crypto. And there are many other studies that showed similar results, including one that Mode, we did one ourselves, and you tend to see somewhere between 40 to 60% of people who hold crypto would like to get paid a crypto salary. So with this in mind, the big question really is why wouldn't a company want to give the employees that option? There is such evidence that, you know, it's something that people want, basically to get into crypto in the most convenient way.

Sandra Redlich  07:14

That's true.You don't have to find out yourself and take it into your own hands. But you can just tell your employer Hey, just set it up for me.

Rodrigo Rosa  07:23

Exactly. Yeah. So really to find the answer to your question. Companies, you know, they should really consider offering crypto salaries, because basically, many of the workers would like this. And I guess, for the employer, you know, this is a really good way to differentiate yourself as a forward thinking employer, you know, offering what is today still a very unique benefit. And, you know, giving you the ability to attract and retain top talent. Especially for the younger generations, or Millennials or Gen Z, who are the main adopters of crypto today. And interestingly, Mode, when we started offering this, this is how it started. So we had many of our employees asking us for it. So the product started with demand, natural demand from our own employees. So we decided to run a pilot, the take up was really great. Over half of employees opted in. And after we finished the successful pilot for a couple of months, we then decided that it was an absolute no brainer to bring this product to market. We did that earlier this year. And, you know, when we put out a job posts, for example, we list this as an employee park, you know, job descriptions. And this goes down really well. When we talk to candidates, you know, they always come back and say, this is a great perk. We often hear them saying, Oh, this is so cool. And, you know, I think we hear this specially because it's such a rare perk. It's also something that people don't necessarily expect yet. They would like to expect it. And there are very limited number of providers and employees actually offering this right now.

Sandra Redlich  09:03

Yeah. So you said that you basically hear from employers that they want this... employees sorry, that they want to be paid in crypto, what are, apart from the flexibility that you mentioned before, what are the other advantages for an employee to be paid in crypto from your experience, from what people tell you why they want to be paid in crypto?

Rodrigo Rosa  09:24

No, absolutely. I think there really are three main reasons for this. So you know, once an employee has made the decision that they would like to go to crypto or they already have crypto, they already purchase crypto. It's really then you know, where do we find the payroll method, right. And one of the main benefits of this concept is what we call dollar cost averaging, which is a kind of, you know, a methodology, famous way of investing generally in investment terms. Being still a very relatively nascent asset, cryptocurrencies, there tends to be still volatility, you know, a fair amount of volatility in the price of crypto. And by doing this through payroll, you're buying in regular intervals each month, what happens is you reduce the risk of volatility in your holdings, because sometimes you buy it when the price is a bit lower. Sometimes you buy when it's somewhere in the middle, sometimes you're gonna buy it, where you know, at a higher price. But over the long run, the price that you buy will be nicely averaged, reducing the effects of volatility in crypto. So this dollar cost averaging, it's really a powerful thing. If you'd like to buy crypto regularly, also, the unified payroll ensures that you have kind of a lot more discipline to execute your purchases, because it sort of removes the emotions behind every purchase. So I personally sometimes let my emotions get the best of me. And I end up not buying crypto when I plan to, because I get distracted by the short term news or sentiment that you see in the media. So having a more disciplined buying schedule for payroll, it really ensures that you stick to your long term plans. And I think finally, you know, crypto payroll is really the ultimate convenience play to buy crypto. If at least part of your strategy, or perhaps even your entire strategy, is to dollar cost average some of your holdings in crypto, it doesn't really get more convenient and easy to just have it automatically done via, you know, your salary. There's no need to move money between accounts at certain times of the month and go through the purchase process. It really is like a set and forget approach. So it really is the most convenient way and disciplined way to get into crypto.

Sandra Redlich  12:06

Because you mentioned the volatility, maybe now's a good time to actually address something that's been happening in the last couple of weeks. I think there was in the media a lot that there was a big drop in crypto prices. And the rates went down, short term rates went down for people. So what would that look like if I'm employed, being paid in crypto and I read the news and I get scared Oh, my, you know, my salary is going to drop heaps? Or how does that work?

Rodrigo Rosa  12:35

Actually one thing worth highlighting is that the way that we approach payroll means that employees can actually change, pause or stop the Bitcoin contributions, which is basically contribution from their net salary, you know, taking off attacks at any point. So it's worth highlighting that they have full flexibility to adjust the spend on crypto according to their financial situation. Secondly, you know, the different ways that people look at crypto, I personally believe that it's impossible to predict the price of crypto in the short term, nobody can do that, you know, in the same way they can't predict share prices, for example, it's incredibly difficult, especially because it's still a fairly volatile asset class.  So I think the best way to look at this is to really take a long view approach, if you do believe that crypto is the future, and that it is here to stay. And you believe in the prospect of having the economy and crypto being part of the economy, you do need to take a long term view. And I think payroll does that, you know, it's about building your portfolio of crypto very gradually over time. And really kind of ignoring the kind of ups and downs that you see on a weekly or monthly basis and really holding tight. You know, not panic selling or having that kind of approach to crypto trying to trade it. So, ultimately, I think this is what the payroll approach does, you know, you dollar cost average, you take a long term view, you build it over time, in a similar way that you would build a pension or perhaps other types of investments. So yeah, I think my general view here is take a long term view and try to avoid these panic selling or trying to buy low, buy high because you know, it's not something that people can predict.

Sandra Redlich  14:35

Yeah, yeah. That makes a lot of sense. So to get a little bit more practical - when I want to start paying my employees in crypto and I'm looking for a provider that does that like Mode, what would be the first steps? So what do I have to set up first? Maybe on my side, on the company site, what can Mode do for me and what are the different options that I have in terms of paying fully, paying only part of the wage in crypto, what are the different options that your clients have?

Rodrigo Rosa  15:10

It's actually really, really simple and easy for an employer, you know, to implement crypto payroll, in our case, it's Bitcoin payroll remote. Basically, you know, as the crypto farm, we do all of the heavy lifting on the crypto side. So on the employee side, all they have to do is really go for a simple process of enrolling the employees through an opt in process. So basically asking the question, who would like to do this to participate and basically how much each month of your net salary would you like to go towards crypto. So it's just the signup process. But also, this is the opportunity to inform and provide all the educational material, especially for those who are new to crypto, about how everything works, you know, and some more information about the crypto space in general. Then the opted in employees just need to download the app and create an account, so this is on the employee side, they register and create an account. And then ahead of pay day, it's really simple, just like any other net salary deduction that an employer could do as part of the payroll. They will basically add that deduction, they send the money to Mode, then together with a list of employees and how much each one of them is buying with the amount in fiat currency, in the case for us it's, you know, British Pound. And voila, we just credit them, the employees Mode account, with Bitcoin, you know, at the exchange rate on the time of payday. So I guess from an employer's point of view, they don't have to have... they don't need to have any technical integration nor do they require exposure to crypto, because we take care of that, you know, they just send us the British pound amount. And then once the Bitcoins credit into the employee's account, you know, they receive a nice notification in the app, you know, where they can also view all the historical transactions and all the balances. And I think the cool thing also to highlight for employees is they have instant access to the Bitcoin. So from the moment that, you know, the Bitcoin payroll goes into their account, 24/7 they can convert that Bitcoin back into GBP if they want and then withdraw it to their bank account, should they want to, or should they need access to the funds. They have full control.

Sandra Redlich  17:38

Yeah, that would have been my next question, what happens if they want to access the Bitcoin and transfer it? And what happens if the employees have any questions, any technical problems? I'm guessing they would be directly communicating with Mode instead of the employer?

Rodrigo Rosa  17:58

Yeah, I think that's, that's really important, especially because what we're seeing is a lot of people today who like this kind of service, or who are interested in this service, because, you know, it's a very kind of easy and steady way to get into crypto right through small deduction. So these tend to be crypto curious people as well. And they don't know necessarily.... They are not that experienced with crypto. So we, you know, before we go live with an employer, we have ama sessions, we provide a bunch of reading materials, you know, our own materials, also independent materials as well. And, you know, once they're onboarded, or even before they are signed up, if they have any questions about the service, how it works, etc, we have, you know, a pretty extensive customer support, where they can, you know, write to us, or, you know, via email, or even talk to our sales team, and we can provide that support needed. So, we're really there to help them, you know, kind of white glove service the entire way.

Sandra Redlich  19:02

One thing that comes to mind quickly when talking about crypto, is that it's not regulated or that it's, let's say, less regulated than normal currencies or payments. But when we're talking about wages and salaries, obviously there's tax, there's depending on where you're paying your employees, social benefits and insurance to be paid. How does that work when you choose to pay your employees in Bitcoin or in any other cryptocurrency? How's that regulated?

Rodrigo Rosa  19:32

Yeah, this is a really good question. And, yeah, let me try to simplify this. So this is a really hot topic in the UK, more specifically, where we're based. And, you know, it's also a hot topic in many other countries like in the US and Europe, in Australia and so on. Generally speaking, cryptocurrencies are not yet regulated in most countries. We have to remember that crypto, like I said earlier, is still in its nascent days. But many governments, including in Europe, in the UK, in the US, are very seriously looking into crypto and how to best regulate the space because they realize that cryptocurrencies are here to stay, and they will play an important role in the future economy. So, for example, I think it was last month, Rishi Sunak, Chancellor in the UK, he announced that the government is determined, absolute determined to make the UK one of the main crypto hubs in the world. Also, the Treasury said that there is a plan to consult on regulating a much wider range of cryptocurrencies later this year. They didn't specify which but I guess we can guess which they might be, you know, I guess, the main cryptocurrencies today. So, the government is really focusing on creating regulation to help plug cryptocurrencies into use cases in the economy. And the really cool thing is, the Treasury also said that he would... he was going to ask at the Royal Mint to create a non fungible token, an NFT this summer, which I think is really cool, because it shows that they're really keen, not only to like regulate the space, look in the space, but also to build knowledge internally, about blockchain about NFTs. And so regulation will be really good for the sector, because it'll help with the fright. And in my opinion, it's just a matter of time before it comes in. And it's definitely a priority for many governments. It's worth pointing out that many financial institutions that deal with crypto also work with fiat money. GBP, US dollar and so forth. And they hold customer funds in balances, right. And there is a lot of existing regulation that is relevant to these institutions. And currently, they're heavily focused on protecting users in the funds. So all the registered and regulated exchanges are required to adhere to money laundering regulations, you know, payment, service, regulation, and so on. Let's use maybe the case of Mode. Here in the UK, we take regulation very seriously. We are a registered financial institution regulated by the FCA. We also hold an EMI license and a crypto asset registration. And then the latter actually enables us to provide our users with access to, you know, a centralized framework such as a bank to withdraw their coins into GBP. So basically holding this class registration really enables us to do that thing that I told you earlier, which is, you know, once someone has crypto, you know, a Bitcoin in their account, they can withdraw it instantly into a bank account. And so this is why we, one of the reasons, it's really important that we hold that registration with the FCA. So people, you know, who'd like to get into crypto, they really should take time to research providers and seek one that is recognized and a regulated financial institution to make sure that their funds and their crypto are as protected as possible.

Sandra Redlich  23:12

Yeah. And if I'm choosing to, if I'm being paid in crypto, and I'm choosing to transfer it into pounds, or whatever currency I need. How is that taxed? That's probably a difficult question to ask, because there's different tax systems in every country all over the world. But just in your experience, maybe focusing on the UK market, would that incur any tax for me as an employee?

Rodrigo Rosa  23:39

Yeah, so I guess there is maybe two parts to this question. I guess the first one is income tax. And you know, and any taxes on a source of income, for example, like National Insurance, as well. And there is capital gains tax. Okay. So first, let's talk about income tax, because that's also something employers should pay attention to. So just, you know, I'm gonna talk about the UK, but this is also a general rule in most countries. So, crypto salary is taxed normally just like getting paid in fiat currency. And the way that it actually works, certainly the way that we do it, is that the employee is actually paid first, in normal currency, fiat currency like British pounds. So they're paid their net salary, you know, and then all the deductions take place, like National Insurance and like income tax. So all those things are applied before we actually run the crypto payroll. So, once the employer calculates the net salary, then what they will do is they will do a crypto payroll deduction from the net salary of the employee and that is the money that is then sent to Mode to then purchase crypto. So all the calculations have already been done. So I guess the short answer is there are no implications from the income tax point of view. However, once an employee or worker has the crypto at some point, they will probably sell their crypto, right? Convert into pounds. And they might at that point either make a gain or a loss. And at this point, it's just like any other assets like shares, for example, the employee will be liable to pay capital gains tax on that. And this works in exactly the same way as any other assets. So if you make some money, I think in the UK, the tax amount is 20%. But there is also an annual allowance of free capital gains. And that's the responsibility of the employee to calculate that information on an annual basis each fiscal year and report that to the authorities, tax authorities, with a tax return.

Sandra Redlich  26:04

So it's basically what you have to do anyway, so if you're being paid, if you have a salary, you have to do income tax anyways. And potentially, depending on your situation, and what assets you have, you have to look at the other aspects of that as well. So no additional implications for the employee. That sounds pretty, that sounds pretty promising.

Rodrigo Rosa  26:25

Absolutely, yeah.

Sandra Redlich  26:27

Looking at all these developments, and I mean, we've discussed some of the potential challenges already, is there anything else you can think of that might pop into people's heads in terms of a challenge for setting it up? Either from an employer side or from an employee side? What are the big hurdles people have to jump when they first want to start on their journey to pay people in cryptocurrency?

Rodrigo Rosa  26:52

Yeah, I really think it's very simple. Because we don't have, like I said, any integrations that are really needed. The technical implementation of this is very, very simple. It just involves, like I said, the three steps in the process, which is employee opt in, an education process, and then there is the account creation, and then the monthly processing, which is just sending us the information about each employee, how much to bank, and send us the funds. So those are the basic steps. Maybe the only other thing worth highlighting is, like anything, if you do any change to payroll, you know, this is a new field let's call it, in a company's payroll. So they have to have some sort of process in place. So either work with their payroll provider, or the payroll software to kind of add that additional line there for after tax. But from what we've seen, the companies that we've worked with so far, this is really, really simple. It really isn't, you know, it's a kind of task that already exists, you just call in a crypto payroll and adding a new line on the other payroll software. In order to make that even easier to help companies, we're also partnering with payroll companies to try to have as much integration as possible there to facilitate that process. So that's something that we want to make it ultimately, super convenient for employees to be able to just with a few clicks implement this, you know. So yeah, I don't... nothing else springs to mind as far as challenges. Aactually, just one thing worth highlighting is, I do think the main challenge is, for an employee, it's really to like, is this something they should do? So I think for those who have this in their agenda, I think the best thing to do is just, you know, is it something that will actually make your employees happier, you know, so they should go out there, do some research, do a survey internally, ask the question to people. And then once they're done, I think the challenge from the employee side is mainly, you know, if you're new to crypto, and you really want to onboard on this journey, is I would urge everyone really do your research. You know, it is not a simple space. So you should really do research about which Cryptos you think you are interested in getting into whether it's Bitcoin, whether it is Ethereum. I'd say I think that's the main challenge, all this is really for the employee to get informed to make the right decisions when they buy a crypto.

Sandra Redlich  29:32

Well, I think we've covered a lot of aspects of this already. So the only thing left for me to ask is, what's next? What's the future? For crypto in the workplace and maybe for work in general from your point of view?

Rodrigo Rosa  29:51

Yeah, it's a very kind of interesting space, Crypto, in my opinion. And I say this for a few reasons. So the future of crypto in my opinion is generally bright. You have so many tailwinds behind it. So you have huge adoption growth. I think last year, some estimates, you know, around 300 million people at the end of last year, owned crypto worldwide. That is a lot of people. And, you know, if you look at current growth rates, you know, it's the compounded growth rate of crypto over the years, if that continues, it won't be too many years before we hit, you know, around a billion people. You have recognition from governments that cryptocurrencies are here to stay, you know, with dedicated resources, you know, from governments to regulate the industry. Every major bank today basically provides access to crypto products. And they're also investing in many crypto projects, you know, major global banks, institution adoption, you know, you see companies like Tesla holding Bitcoin on the balance sheet. You'll see many retailers, you know, like Starbucks, for example, starting to accept crypto payments, in many major payment processes, you know, companies like checkout.com, for example, helping companies to accept crypto payments. So, basically, I think crypto will play a much bigger part in our lives, where there's much more of a circular economy around crypto where workers will be able to get paid in crypto, spend crypto almost anywhere, especially on the web, you know, allocate some of the savings to crypto, be rewarded in crypto for loyalty, for example, you know, this is something we at Mode do, so people on the daily day to day shopping, they can buy things at top retailers and receive bitcoin cash back, for example. So it's also like a token of loyalty. You know, people will be able to send money to the friends and family globally, you know, through crypto. And also, there are also some broader themes that are sort of around crypto but connect with crypto really well. So you've got the advent of Web3, right, which is basically for those who don't know, is a decentralized internet, basically powered by blockchain. And crypto has a huge potential to be the core currency in a decentralized internet, because it's already powered by blockchain. And it's already global in its nature. So even if you think of crypto in its capability as a means of payments globally, you know, payment systems were actually designed decades ago, these payments schemes are very clunky. They're domestic in nature, they're not global, and they're massively outdated. So there is a strong argument for a new and more efficient payment slash value exchange system in the world. The cryptocurrencies are in prime position to tackle this problem, due to their global nature and the fact that they're powered by blockchain. So yeah, it could also be like, if you just link it to something in real life, you know, what is going to be in 10 years, the best way to pay a remote distributed workforce globally? It could well be that crypto is one of the best ways to actually make global payments, you know, because they are instant and more efficient. So I guess to sum up, generally, employees should really pay attention to this space, because crypto will likely play an increasing role in the lives of workers in the economy. And I really think it will offer great opportunities for those who want to be one step ahead of the trends.

Sandra Redlich  33:42

Yeah. That sounds awesome, I'm fired up now. You definitely seem very passionate about this topic. And yeah, I think, fair point to everyone. Just look into this and know your options. I guess that's the first step. Just be aware of what's out there and what the opportunities are. And a common theme we've had in our podcast episodes before is listen to your employees. Listen to what people want, what their needs are, and what they're telling you what would make their lives better and easier. And if cryptocurrency is part of that, then you know where to find us. Thank you so much for taking the time to explain all of this and to let you share what your everyday life looks like. I'm very interested to see how it's gonna develop and I'm pretty sure that we'll hear more about this topic in the future. And we'll definitely be back in touch to get your your insights on other topics coming up in this space.

Rodrigo Rosa  34:40

That's great Sandra. It was really nice talking to you. I really enjoyed that. Have a great day.

Sandra Redlich  34:47

Thank you, you too, bye!