To say that cryptocurrency is in the headlines is a bit of an understatement. In late April, Fidelity announced that it would allow the 23,000 employers who operate their 401(k) plans on the Fidelity platform to include bitcoin as a permissible investment alternative—in the face of a recent Department of Labor pronouncement that doing so is a glaringly bad idea from the perspective of the fiduciary obligations that inform how 401(k) plan investments are to be selected.
The inclusion of cryptocurrency as a retirement plan investment is not the only way that crypto has entered the workplace. There is anecdotal evidence that employers seeking to differentiate themselves in a competitive hiring environment are offering to pay their workers with cryptocurrency.
Which brings us to the topic at hand: the tax implications of cryptocurrency as compensation. Other considerations related to paying employees with cryptocurrency—including the ramifications to employers if the SEC concludes that cryptocurrency is to be characterized as a “security” under the securities laws, plus the interaction between cryptocurrency payments and the federal and state wage and hour laws—raise important legal issues in their own right.
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