Can Workers in California Legally be Paid in Cryptocurrency?


LOS ANGELES.- As the value of cryptocurrencies has exploded in 2021, many people are looking to get in on the craze. But as with many new business trends, the waters of the crypto world can be very tough to navigate. One area where these waters are particularly murky is in how most people get their currency.

Can workers in California legally be paid in cryptocurrency?

Both federal and state employment law do not specifically address cryptocurrency as a form of payment, which leaves the answer to that question open to interpretation. But two areas which could hold the key to that answer are A) whether cryptocurrency is actually currency, and crypto's notorious volatility.

Federal law allows employers to combine U.S. and foreign currency to be used as payment to employees, so long as payment is in a "negotiable instrument payable at par." California law prohibits payment in the form of coupons or other redeemable items, though it does not specifically mention cryptocurrency. So if cryptocurrency is found to have the same legal standing as foreign currency, that could help it qualify as currency.

In terms of cryptocurrency's well-documented volatility, two issues could be at play when it comes to determining its potential as payment for wages. First, if an employee is owed back pay, would they be paid the value of that cryptocurrency on the date the work was performed, or on the day the employee is paid? Second, if the cryptocurrency increases in value, is the employee now subject to capital gains taxes? And the issues of payroll reporting and tax withholdings for cryptocurrency are far from settled.

If you have been paid in cryptocurrency, or have questions about potentially being paid in cryptocurrency, you should seek counsel to discuss your options.

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