The Dos and Don'ts of Accepting Crypto Payments as a Freelancer

It is difficult to overstate the potential for crypto to revolutionize the way we work and earn money. Successive bull runs in crypto saw the first, large-scale introduction of remote-first teams. Rather than hiring locally, they were hiring globally. Much of this shift is thanks to the ability for anyone, anywhere in the world being able to get paid in crypto. 

However, as with any new and rapidly evolving industry, there are also pitfalls to avoid and best practices to emulate for those looking to get paid in crypto as freelancers. 

Here’s a list of three dos, and three don’ts for freelancers to consider when being paid in crypto.

DON’T:

1. Keep all your money in custodial wallets

2022 was notable in crypto history for the collapsing dominoes of centralized finance lending platforms and crypto exchanges. From the implosion of UST’s Anchor Protocol, to Celsius and FTX - each time a popular centralized crypto platform fell, they took with them the crypto earnings of thousands of users. 

One of the most important things to keep in mind is the issue of private key ownership. As a freelancer, it is crucial that you are in full control of your own private keys and that you do not entrust them to any third party. This includes using centralized exchanges or CeFi platforms, as these can be vulnerable to hacking or mismanagement. 

2. Get paid only in one type of crypto

As DAO contributors, or freelancers for nascent project teams, it is common for many freelancers to be offered compensation in the form of a project’s own token. In some cases this may be governance tokens of a protocol, or a stablecoin with close ties to the protocol’s core team.

The temptation of accepting compensation in highly volatile tokens of native projects is clear. When they launch to the public, and grow - the potential for rapid price appreciation can be too good to pass up. Perhaps the most obvious example in recent history of why that might be a bad idea is the collapse of Terra, Luna and the UST ecosystem. ‍

3. Evade taxes and other reporting requirements

The libertarian ethos that undergirds the philosophical underpinnings of crypto and Web3, combined with regulatory uncertainty about the asset class’ legal status in many jurisdictions make it incredibly easy for freelancers to use crypto as a way to mitigate their tax burdens.

While this may be a legitimate tax avoidance strategy in some places - most crypto assets are likely to be subject to income taxes. Even influencers that receive gifts from sponsors must declare them as a form of taxable income in most countries. 

In many countries, crypto assets are considered taxable income and must be reported to the relevant authorities. However, some freelancers may be tempted to evade taxes by not reporting their crypto income. This is not only illegal, but it can also lead to significant fines and penalties. 

For instance, starting from 2024, any U.S. "person" (including an individual, corporation, partnership, association, trust or estate), in a trade or business who receives more than $10,000 in cash - or crypto - in a single transaction, or series of related transactions must file a Form 8300 within 15 days. Failure to do so may result in civil and criminal penalities.