For the last year or so, I worked as a self employed consultant for companies based in the US. Therefore, I was getting paid in a foreign currency.
Now, I never encountered a situation like this and quickly found out how expensive it is to move money across borders and banks. Now my wife is Canadian and we both live in Germany, so I experienced the hassle of getting money inside the family across the border from second hand.
Getting paid for a job is a little different though, because:
- You have to pay taxes
- You want it in a timely manner
- You don’t want to pay a lot of fees
Luckily, I had the option between US Dollar and Bitcoin, so I tried both for a while to see what’s the cheapest and fastest way for me.
Getting paid in USD vs. BTC
A rough TL;DR looks like this:
- If your company has to buy Bitcoin to be able to pay you in Bitcoin, it is more expensive then just accepting US Dollar
- If your company already owns Bitcoin, it is way faster and cheaper to get paid in Bitcoin vs. in USD
- If you have to transfer your Bitcoin to Euro (which you probably have to do to pay rent etc.), it is still cheaper to get Bitcoin, sell it on an exchange and get the money onto your bank account. To some degree it is as fast or even faster then USD->EUR
- You have to use Transferwise to be able to get the cheapest and fastest way to get paid in USD and transfer it to EUR, everything else is way more expensive and slower then to use Bitcoin
I am not a big Bitcoin maximalist, but I like the idea of programmable money. Having worked for larger financial institutions, I am aware of the tech stack and slow processes banks have to fight against.
Lets say you bill your client 10k USD. If you want to transfer this amount of money to EUR:
- Transferwise: 51.18 USD.
- Bitcoin: Around 30 Dollar (give or take) where the transport from one address to the other can cost you around 2 Dollar, and around 26 Dollar to sell the Bitcoin onto the market (0.26% at some exchanges).
Transferwise vs. Bitcoin
Why using Transferwise? Well with this service, after creating an account and verifying yourself (which can take up to two days), you can create US bank accounts and EUR bank accounts with a few clicks.
After you have a virtual US bank account with Transferwise, you can give these details to your company or person which pays you. After receiving the Dollars, you can then convert them to EUR (based on the conversation rate + fee on Transferwise), and then transfer the money to your own bank account in Germany.
Transferwise is cheaper because they basically trick the banking system. They won’t immediately send the money across borders. They store transactions and make larger bulk transfer after a certain timeframe (lets say after each month). Transferwise has partnered with banks around the globe, so they can internally book transactions, and then rebalance after each month.
These bulk transfers make it faster (because they just internally move money) and cheaper (because of the bulk transfers each month).
Now it is pretty mind boggling to argue against Bitcoin when you have to cheat your way through the banking system to be able to compete against a, by design, slower method of transfer.
Experiences using Transferwise
The service itself is great, cheap and fast. I used it a few times and my Dollars got converted and were on my bank account in Germany in Euro at the same day.
Getting paid in Bitcoin
Lets assume the company which pays you already has Bitcoin. Therefore the speed of transaction is around 2-15 Minutes based on my experiences. Once the company send the transaction, you can follow it “live” on the Blockchain and see when it should arrive. I never felt so much in control of my money then when receiving Bitcoin.
I used an address on an exchange, so I could, after receiving BTC, sell it and transfer the money to my German bank account. Now I would love the price of BTC to be stable and my landlord and other suppliers to accept it, but for this to be happen, the price of BTC has to rise a magnitude of what it is now.
The whole process of receiving BTC, selling it and getting the money to my bank account was in a range of 5-8 hours. The most time lag came from sending Euros from the exchange to my bank account.
What about taxes?
Now people assume you gamble when you are getting paid in Bitcoin. That’s not true. It’s just another currency. Instead of being backed by the largest military in the world, it is in the hands of everyone who want to participate in it.
The German government doesn't particularly care in what and where you are getting paid. Which means:
- You have a contract with a company or you write a bill
- After you receive the money somehow, you have to declare this as income in your taxes
So even if you get paid in apartments on a Greek island, you still have to pay taxes on the value of this payment in EUR, in Germany after the end of the year.
Now when you receive Bitcoin and you sell it, you can either make a loss or a profit (or you sell it for the exact same price you received it). If you make a profit off this transaction, you have to pay taxes on this profit as well. If you make a loss, you can even reduce your income and pay less income at the end of the year. That's it.
All in all, it's actually not very exciting. I chose Bitcoin because it was faster and I believe it's good to get familiar with the future of money sooner rather than later.
If you want to get paid in Bitcoin, make sure you choose an exchange you can trust, and don't let Bitcoins pile up at your exchange, but rather use a hardware wallet to store them.
So if your company owns Bitcoin, it is faster and cheaper to get paid then it is in a foreign currency. If your company operates in Europe and you could already choose EUR, you will pay a higher fee to get paid in BTC if you have to sell it (which you probably will).
Be sure you understand that Bitcoin might not compete with the European banking system, and there are cheaper and faster currencies out there. Bitcoin could be used as a transition currency for the old FIAT world to move over to the digital space, and to be established as a form of reserve currency. But, as of now, it is a nice and easy way to cross borders with it.
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