Everybody
has heard about Bitcoin which was released in January 2009. The current Market
value of Bitcoin is INR 10, 81,672 (US $ 16949.12).
Bitcoin
use block chain for transaction. The Blockchain is a public ledger (record
book) that records Bitcoin transactions.
Understand by Example
è
Mr. X pays 1 Bitcoin to Mr. Y. This transaction broadcast to this
network using readily available software applications. Network nodes validates
transactions, add them to their record book, and then broadcast this book to
other nodes. So, it is a distributed network.
Bitcoin
have no physical presence and value of coin purely depends upon demand and
supply and Bitcoin production is limited. There are rules by which Bitcoin can
be produced. The logic used here is ‘Blocks’. Blocks are pages of ledger
(record book).
Bitcoin Generation Formula
The
number of Bitcoins generated per block starts at 50 and is halved every 2,
10,000 blocks (about four years). The limit on bitcoins is 21 Million.
Current
Rate of supply: 12.5
bitcoins per block (approximately every ten minutes) until mid-2020 and then
afterwards 6.25 bitcoins per block for 4 years until next halving. This halving
continues until 2110–40, when 21 million bitcoins will have been issued.
Not
long ago, Bitwage – the Bitcoin payroll and international wage system announced
that it will be launching services in UK. Bitwage is a platform which empowers
employers, employees, workers to pay or receive wages in Bitcoin and other
commodities like gold and silver.
Advantage of
above system:
(1) It allows quick and effective payroll by
employers by taking out banking process and Cheque clearing delays, through
leveraging Bitcoin and Blockchain technology.
(2) No need to invest your salary in other investments.
(3) Flexibility
in transferring funds to other
parties.
(4) Flexibility
in transferring fund cross-border
Few
Challenges:
(1) Payroll
Systems should be able to convert
monetary value of income to Bitcoin Balance as per current market rate
(2) As of now,
Government Systems accepts taxes, social
security contributions in government controlled currency only and therefore
payroll systems should report these in legacy payment options
(3) Limited Supply of Bitcoins/any other crypto currency
(4) Acceptance of
system by employees as this system is not regulated by government.
(5) Conversion of
Bitcoin after salary payment to cash for expenses like grocery etc. They need
to visit Bitcoin ATM for conversion
as presently these ATM are limited
It
is important therefore that employers, workers and business consider the
implications of switching from traditional money bank accounts to trading in
this way and get appropriate legal and accounting advice.
Capital Gain
tax on Bitcoins
As
Crypto currency is traded in market, the increase in value may attract capital
gain tax in some countries. Canada revenue authority is taxing these profits as
Capital Gain.
To
prevent you or your employees from freaking out at tax time because you or they
received a cryptocurrency that has gone up in value come tax season, it is
recommended that your employees or contractors keep a record of the
cryptocurrency’s exchange rate every time they receive it.
Bitcoin as
Benefit-in-kind
Compensation
structure can be a combination of Cash and Bitcoins. Employer can offer
Bitcoins as benefit-in-kind or employer provided bitcoins (like employer
provided stock options). This will require accounting valuation rules,
provisioning rules. Payroll Systems should also be able to configure compensation
structure in two different type of payment and should take care of conversion
rules.
To
summarize, Bitcoins and Block Chain can benefit employees but the question is
Will
more tech firms flock to Bitcoin payments as an option?
It’s
a delightful thought, but where it does happen, we imagine it’ll be used as an
innovative means of making long-term savings, rather than for weekly groceries.
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