employee bitcoin

It’s about to get much easier to be paid in bitcoin. Atlanta-based bitcoin payments platform BitPay recently introduced its Bitcoin Payroll API into limited beta and continues to expand its service. Previously, paying employees in bitcoin required that an employer have a high degree of technical competency and assume the currency risks associated with holding bitcoin. BitPay aims to solve both issues.

BitPay describes itself as the world’s largest digital currency payment processor. In the past, the company has worked mostly with ecommerce merchants and brick-and-mortar retailers (like car dealerships) that want to accept bitcoin without the currency risk, fraud risk, or chargeback risk. The company also allows these merchants to accept payments from “any country on earth.” BitPay recently crossed the 20,000 merchant milestone – it’s adding more than 1,000 merchants per week – and in January announced that is has yet to suffer any cases of fraud. (Hopefully it then knocked on the world’s largest piece of wood.)

By extending its well known payments service to payroll, BitPay is solving a second major problem slowing mainstream bitcoin adoption: Acquiring bitcoin can be a slow and cumbersome process. By receiving bitcoin directly from one’s employer, this problem is all but eliminated. There are questions, however, as to whether BitPay has access to enough bitcoin liquidity to deliver this service at scale, should it prove popular.

Accepting bitcoin from your employer is entirely optional. Under the BitPay system, employees can select to receive a portion or all of their salary (W2 employees only, currently) in bitcoin. Importantly, all salary payments are handled after tax, meaning that withholding and payments to federal and state tax authorities are handled in dollars. The net payment is then remitted to the employee in bitcoin or a combination of bitcoin and dollars.

BitPay explained its pricing mechanism to a potential beta partner, writing in an email:

[Employers] can specify the exact date and time at which the batch should be executed. At the time the batch begins execution, BitPay will compute the volume-weighted average price of bitcoin over the previous 24-hour period from your choice of one of two available bitcoin exchanges.

Of course accepting bitcoin in lieu of US Dollar payment has its risks. The most obvious risk is that bitcoin is still a new and highly speculative digital asset class which could lose significant value over short periods of time. Also, while the number of merchants accepting bitcoin is growing exponentially, there are still limits as to the real world commerce applications of bitcoin-denominated income. Finally, once you have your bitcoin wealth, there’s still the challenge of storing it securely – a process that’s getting easier but must continue to do so before mass adoption is feasible.

For this reason, it would seem prudent that employees who are so inclined to accept payment in bitcoin do so with only a fraction of their income. In this way, the bitcoin salary could be akin to common retirement withholdings, although obviously far more risky.

BitPay is still accepting trial participants, writing on its website:

BitPay is presently undergoing pre-availability testing of this API with a small number of clients. Our objective with this early round of testing is to validate the capabilities of the API and to tune the automated and business processes associated with this service. At the conclusion of testing we expect to make this API generally available. We do have room to add additional pre-availability testing partners.

The earliest public examples of companies paying their employees in bitcoin are the Internet Archive, which announced the policy in February 2012, and a Finnish dev shop which followed suit in March.

BitPay isn’t asking employers and employees to do anything that they’re not doing themselves. All 20 of the company’s own employees receive at least a portion of their salaries in bitcoin, while co-founder and CEO Tony Gallippi along with three other employees receive 100 percent of their after-tax pay in bitcoin. It was this internal demand that led to BitPay ultimately productizing its Bitcoin Payroll API.

The Atlanta-based startup has raised $2.5 million to date, including a May 2013 $2 million Seed round led by Founders Fund. Prior backers include CoinDesk founder Shakil Khan, SecondMarket and Bitcoin Investment Trust founder Barry Silbert, Automatic founder Matt Mullenweg, and Ashton Kutcher, among others. The company offers its platform on a SaaS basis, rather than charging fees on a per-transaction basis.

Bitcoin is slowly gaining support outside the realm of libertarian, tech early adopters. Services like the Bitcoin Payroll API and the standard BitPay payments platform is pushing the currency further into the mainstream.

  1. BitPay is a Payment Service Provider (PSP) specializing in ecommerce, B2B, and enterprise solutions for virtual currencies.

    Virtual currencies are designed for the internet, and are a much safer and more efficient form of payment than credit cards, which were designed in the 1950s. Credit cards were never designed for the internet. The waste, fraud, risks, and costs associated with using the technology in a way it was never intended are becoming excessive for both businesses and consumers.