As the specter of recession looms, US companies are becoming more cautious about increasing the headcount in their organisations. However, as the work still needs to get done, according to a Bloomberg study, more than 75 per cent of US businesses are prefering to hire freelancers during the economic uncertainty.
According to a recent survey conducted by Humans.net – a US-based company – about one-third of the freelancers would like to get their payments in crypto currencies. Some, the entire package and some, a part of their salary package.
“With over 75 per cent of businesses in the US alone looking to hire freelance workers, the global demand for freelancers is only expected to rise in the coming years. Of these freelancers, one in three would like to get paid in crypto, especially as crypto prices have dropped — making the current market situation an opportune time to invest in digital assets. Businesses are happy to oblige and provide their payments in cryptocurrency, especially in a bid to attract younger talent,” said Slava Demchuk, CEO of a UK-based anti-money laundering service AMLBot and the first crypto wallet with AML module AMLSafe.
“Many hardworking people turn to freelancing to earn extra cash just to get by as inflation rates continue to climb. What’s devastating is how at risk these people are of being scammed out of their earnings because they are unaware of the dangers of not validating the payer’s wallet,” he added.
So, if you are looking for freelancing jobs in international companies, you may also get paid in crypto currencies and would also face the associated risks.
Although, crypto currencies are mode of fast and hassle-free international payments having no hidden commission and you needn’t worry about currency exchange rates among other benefits, alarming growth of “dirty” crypto creates a dilemma for freelancers.
“Around 40 per cent of BTC transactions are illegal. If you’re a freelancer, receiving dirty crypto can put you at risk and get your account banned,” said Demchuk.
So, apart from facing the fluctuations in crypto values on the trading platforms, you would have to manage the crypto risks to protect your fund.
“A payer may seem trustworthy at face value, but a freelancer could easily be ripped off without the time to validate their wallet. All you can see is the crypto payment on your account. But the process behind each transaction involves a complex verification process, and the network may block your wallet if they detect too many suspicious transactions,” said Demchuk.
“Anybody could unknowingly receive illicit funds, like drug money, onto their account and not even know it. Everything seems to go well at first until their accounts get frozen or banned without explanation. So even if you completely trust the person paying you, they may unknowingly put you at risk. The only way to protect yourself is to validate each transaction or wallet with the help of a dedicated service — that is basic crypto hygiene,” he added.
According to Demchuk, you may manage the risks in the following ways:
Dirty crypto can come from a number of sources, such as:
- crypto hacking attacks or “cryptojacking”
- criminal activities like money laundering, scams, ransom, or fraud
- unregulated exchanges and dark market transaction
Top tips on how to protect yourself from crypto rip-offs:
- Check incoming transactions: Check the sender’s wallet and each incoming transaction to make sure they’re legitimate. Before you receive the payment, use anti-money laundering screening services to ensure that it’s from a trustworthy source.
- Choose a secure crypto wallet: Consider security features like multi-signature authentication, two-factor authentication (2FA) and built-in AML screening features.
- Choose a secure crypto exchange: Trade crypto only on the exchanges that require Know Your Customer (KYC) verification.
- Consider having several wallets: Create one for your trusted contacts and another for high-risk or unknown contacts. This will help you keep your funds safe and secure and minimize your risk in case you receive dirty crypto on one of your wallets.
Already received dirty crypto. What do I do now?
- Inform the payer: It’s possible that they are unaware of the origin of their funds.
- Never receive any other transactions from the same wallet: This is a no-brainer. There’s a higher risk that you’ll be scammed if you continue to receive payments from the same source.
- Triple-check all future transactions: Be extra vigilant when dealing with future payments. While you might get away with receiving one payment of dirty crypto, the more unusual or suspicious activity on your account, the more likely you are to get caught or banned.
- Try to dispute: If your account was banned or blocked by an exchange, you can try to dispute the decision if you can prove that no fraudulent activity took place.
- Ask for professional help: Seek assistance from companies that offer crypto dispute resolution services and investigations—but do your best not to get into this situation in the first place.
“If you suspect you’ve received “dirty crypto,” take immediate action to protect yourself and your funds. First, inform the payer that they may have been scammed and ask them to stop sending more payments. If your account gets banned or blocked, you may appeal if you can show that no illegal activity occurred. Seek professional help from companies that offer crypto dispute resolution and investigations, if necessary. Moving forward, be extra careful when dealing with future payments and triple-check all transactions for suspicious activity,” said Demchuk.
As there is no clear status of cyrpto currencies in India, so are the taxation rules.
So, if a person gets paid for his/her work in crypto, will it be treated as his/her income or investment for tax purposes? And how will it be taxed?
“Tax laws around cryptocurrency can vary depending on the country. For example, taxpayers in the US must report all crypto sales, conversions, payments, and income to both the IRS and state tax authorities (if relevant), but each action has different taxation implications,” said Demchuk.
“Receiving payment in cryptocurrency, exchanging goods or services for cryptocurrency, mining cryptocurrency, or earning rewards from staking are all considered taxable income. Since these are considered “earned” income, they are subject to both federal and state taxes. As such, you need to record the value of the crypto in US dollars when you received it and include it as part of your gross income on your tax return,” he added.
In respect of the US tax rules, Demchuk said, “Selling cryptocurrencies for cash, converting one cryptocurrency to another, and spending crypto on goods or services are all capital gains. Depending on your tax bracket, they are taxed at zero per cent, 15 per cent, or 20 per cent.”
“However, there are also non-taxable events, such as buying crypto using cash and holding it, donating crypto to a charity or non-profit, receiving or making a gift, or moving your crypto from one wallet or account to another that you own,” he added.
“The regulations are comparable across many countries, but a few do not tax crypto profits – or only do so partially. For instance, these include Singapore and Switzerland, where capital gains tax is not applicable, or Germany for assets that are held for over a year,” Demchuk further said.
However, in India, with the Reserve Bank of India in no mood to give crypto any recognition, for now the payment you get in crypto currencies would not be treated as income.
But you have to pay tax when you redeem the currency to convert it in rupee for your expenses. At this juncture, a question may be raised on the sources of your crypto currencies.
In case, the instances of payments for freelancing in crypto currencies increase, the government won’t let it go untaxed and may bring some regulations to tax the income as well.