How many Web3 companies have not paid salaries in virtual currency? Lawyer Mankiw dares to bet that most companies in the industry have done or are doing this.

After all, the characteristics of the Web3 industry are decentralization and anonymity, and using virtual currency just meets everyone's needs. In addition, many team members come from all over the world. The virtual currency payment method can not only save the high handling fees of cross-border remittances, but also pay salaries anytime and anywhere, making the company more efficient and more international. To be more "conspiratorial", Web3 companies use their own virtual currencies to pay employees, and they don't even have to lose legal currency costs.

You see, killing three birds with one stone, isn't that wonderful? However, ideals are full of hope, while reality is very skinny.

Since virtual currency is not recognized as legal tender by most countries, and it does not need to be settled through banks, it bypasses national supervision and creates complex problems in tax declarations and AML compliance. Therefore, from a regulatory perspective, most countries prohibit it from being used as a means of paying wages.

However, as the Web3 industry gradually penetrates into daily life, national acceptance begins to increase, especially in 2024, and some countries have shown signs of loosening their attitudes on this issue.

So, which mainstream regions around the world allow virtual currencies to be used for salary payments? And what guidance do the policy signals from these regions provide to Web3 companies?

Next, Attorney Mankiw will review the relevant policies of major countries and regions.

Dubai: Recognized

In August 2024, Dubai took a groundbreaking step in the field of virtual currency salary payments.

According to the ruling in Dubai case number 1739/2024, the court explicitly requires employers to pay employees' salaries in virtual currency. The most noteworthy point is that the court requires that the token portion must be paid in accordance with the contract, rather than converted into legal currency. This ruling marks the recognition of the legality of virtual currency salary payment by the Dubai judicial system, and provides judicial protection for salary agreements involving virtual currency in labor contracts.

In contrast, there was a similar case in 2023, but the Dubai Court did not support the virtual currency payment request because the employee failed to provide a clear method for exchanging cryptocurrency for fiat currency.

For Web3 companies that want to do business in Dubai, this case provides a clear legal basis and practical direction. For example, when formulating employment contracts, companies need to clarify the specific terms and value determination methods of cryptocurrency payments, and ensure that payment records are transparent and traceable, so as to achieve flexible payments within the framework of legality and compliance. At the same time, this judgment also sends a positive signal, further consolidating Dubai's position as a Web3-friendly jurisdiction.

Singapore: Clear

As one of the first countries in the world to regulate virtual currencies, Singapore’s legal environment has always been known for its transparency and friendliness. This not only provides a foundation for the implementation of blockchain technology, but also allows Web3 companies to see the possibility of paying salaries in virtual currencies.

According to the latest "Cryptocurrency Income Tax Guidelines" issued by the Inland Revenue Authority of Singapore (IRAS), the legality of digital currency salary payments has become clear. The document states that digital currency salary payments to employees can be regarded as a "non-cash payment" and must be declared and paid income tax according to the market value. In other words, as long as the company fulfills the necessary tax obligations when paying wages, this payment method is allowed in Singapore.

It is worth noting that Singapore emphasizes the compliance requirements for digital currency salary payments: first, companies need to clearly specify the market value of digital currency payments and file tax returns based on this; second, payment records must be clear and traceable in order to meet the audit requirements of the Singapore Inland Revenue Authority. This approach provides a legal framework for Web3 companies while also avoiding compliance risks caused by tax issues.

This policy in Singapore reflects a high degree of inclusiveness towards Web3 companies and provides a practical basis for companies to explore this salary payment model.

United States: Divergence

As a key "base" of the Web3 industry, the encryption policies issued by the United States have always been a "benchmark", affecting the hearts of countries and regions around the world.

The good news for the beginning of the year came on January 9, 2025. According to Bitcoin Magazine, Oklahoma Senator Dusty Deevers proposed the "Bitcoin Freedom Act" (SB325), which explicitly allows employees to choose to be paid in Bitcoin. This bill clearly stipulates that the payment of wages in virtual currency must be completely voluntary and respect the principles of the free market. At the same time, it gives employers and employees the right to choose the payment method that best suits them, providing more flexible options for companies and employees.

Prior to this, Republican-led states such as Texas and Wyoming were also exploring similar regulations to provide businesses with more open and free payment options. However, even so, most states in the United States still tend to be conservative in their stance on virtual currency payments.

This phenomenon is consistent with the results of a survey released by the University of Pennsylvania. According to the survey data, about 41% of Republicans own virtual currency, while only 32% of Democrats do. However, when faced with the phenomenon of virtual currency as a salary payment, only 7% of Americans are willing to accept it, showing the gap in market trust and acceptance.

For Web3 companies that want to explore virtual currency to pay wages in the United States, although some states have adopted an accepting attitude, the supervision has not yet been implemented. Combined with the attitude of the majority of people, the road may be quite difficult at present.

Europe: Unknown

The EU's regulation of digital assets is becoming increasingly sophisticated, especially the introduction and entry into force of the Markets in Crypto-Assets Act (MiCA), which provides a unified legal framework for the use of virtual currencies. However, MiCA mainly regulates the issuance, trading and service providers of crypto assets, and does not directly involve specific provisions for companies to pay employees' salaries in virtual currencies.

Therefore, when it comes to supervision in this area, Attorney Mankiw can only refer to the attitudes of some European countries.

In Germany, virtual currencies are classified as private currencies or assets. Companies can use virtual currencies to pay wages, but they must convert the payment amount into euros at the market value at the time of the transaction and record it, and pay the corresponding income tax. In addition, companies must ensure transaction compliance during the payment process and comply with the relevant requirements of value-added tax (VAT). For example, if wages are paid in Bitcoin, the equivalent amount in euros must be used as the basis for tax treatment. This mechanism provides companies with the possibility of using virtual currencies flexibly while ensuring tax compliance.

In France, virtual currency is classified as movable property. If a company chooses to pay wages with virtual currency, it must declare and pay capital gains tax based on the market value on the day of payment. In addition, companies must report detailed records of virtual currency transactions to the tax authorities to ensure the transparency of the payment process. In addition, France also imposes a fixed tax rate of 30% on virtual currency transactions, including a 17.2% social contribution.

The regulations in the UK are relatively flexible. Web3 companies are required to calculate employees' income tax and national insurance contributions in pounds sterling, while enjoying an annual capital gains tax exemption, which provides certain conveniences for cryptocurrency transactions for companies and employees.

Hong Kong, China: Cautious

Although Hong Kong is currently open to virtual currencies and is actively promoting a regulatory framework in areas related to transactions, it still maintains a traditional and prudent stance in the area of wage payments.

According to a Hong Kong report in January 2025, the Hong Kong Employment Ordinance stipulates that wages must be paid in legal tender, and virtual currency is not considered legal tender. Therefore, it is not advisable to use virtual currency for wage payment, but Web3 companies can give it to employees as rewards or benefits.

In addition, for employees, using virtual currency as salary will also cause obstacles in daily use, such as virtual currency income is difficult to be regarded as a legal source of income by banks. Even if employees clearly state income such as Bitcoin in their tax returns, banks usually do not include it in their income when processing mortgage loans or credit applications.

For Web3 companies that wish to use virtual currency to pay salaries in Hong Kong, the current solution is to pay the basic salary in legal currency and then issue virtual currency as a supplementary reward to avoid legal issues. Of course, the premise of this solution still needs to be based on the wishes of employees.

Mainland China: Prohibited

China has always strictly regulated virtual currencies, explicitly prohibiting their circulation and use as currency in the market. Therefore, in salary disputes involving virtual currencies, my country's judicial institutions usually take a clear attitude, that is, not to provide legal support.

For example, in a typical case heard by the Shenzhen Qianhai Cooperation Zone People's Court in 2024, employee Zhou claimed that the company should pay him the agreed virtual currency salary in addition to his RMB salary. However, the court held that virtual currency could not be used as a form of salary payment and did not support Zhou's claim. At the same time, it was made clear that the agreement to pay salary in virtual currency was invalid because it violated the current law.

This case once again reflects China's policy stance on virtual currencies: virtual currency-related businesses are considered illegal financial activities, and any use of virtual currencies to pay wages cannot be supported by law. This not only means that companies may face legal risks when using virtual currencies to pay wages, but also directly affects the protection of workers' legitimate rights and interests.

Regarding this case, Mankiw has previously written an article titled " Web3 Lawyer: Shenzhen Court Does Not Support Virtual Currency as Wages, What Should I Do? " In the article, Mankiw provided relevant suggestions for Web3 companies and workers:

For Web3 workers , they should clearly require that their wages be paid in RMB in the contract, and properly preserve relevant payment records and evidence so that they can protect their rights and interests through legal channels in the event of disputes;

For Web3 companies , virtual currency wages are a high risk under the current Chinese legal environment. Companies should use legal currency to pay wages and ensure that the terms of the employment contract are clear and compliant. At the same time, companies can convert virtual currency through legal channels abroad to avoid legal disputes caused by illegal payment methods. If necessary, seek professional legal support to ensure compliance and controllable risks.