Navigating Global Regulation: Crypto Organizations Must Adapt to Employ Globally

Contents

• Labor Laws: A Complex Puzzle
• Tax Regulations: Navigating the Unknown
• The Risks of Non-Compliance
• Conclusion

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The explosive growth of the web3 industry has attracted top talent from around the globe, with many professionals drawn to the flexibility, autonomy, and remote work opportunities that these organizations offer. However, as crypto organizations continue to expand, they must navigate the complex landscape of global labor and tax regulations to ensure compliance and maintain their reputation. In this blog post, we will explore the challenges and risks associated with employing a globally distributed workforce and discuss why crypto organizations need to consider the ramifications of global regulation when hiring.

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Labor Laws: A Complex Puzzle

One of the major challenges facing web3 organizations is understanding and complying with the labor laws of each jurisdiction where their workers reside. These laws include requirements such as healthcare access, minimum wage, paid holidays, sick leave, and maternity pay, all of which vary from country to country. For example, the US's Affordable Care Act (ACA) requires employers with more than 50 full-time equivalent employees to offer health insurance coverage or face penalties. Similarly, the UK mandates a minimum of 5 weeks off per year, while Canada requires at least two weeks of paid vacation after one year of employment.

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Complying with these diverse labor laws can be a daunting task, but failure to do so can result in fines, reputational costs, and potential criminal charges. Crypto organizations must invest time and resources in understanding the specific labor laws of each jurisdiction where they employ workers to avoid these consequences.

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Tax Regulations: Navigating the Unknown

As if labor laws weren't complex enough, web3 organizations also face the challenge of interpreting tax regulations in multiple jurisdictions when compensating workers in tokens. While most countries have established tax regulations for crypto tokens as investment vehicles, clear guidelines for token compensation are often lacking, making compliance even more difficult.

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In the US, for example, token income is subject to taxation like any other form of income, including capital gains tax and self-employment tax. However, different rules apply for employees and independent contractors receiving compensation in crypto tokens. Additionally, the IRS and other tax authorities do not accept tokens as direct tax payments, requiring organizations to perform sell transactions to pay workers' tax contributions in fiat currency.

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Canada and Japan have developed specific procedures for token compensation, requiring web3 organizations to file specific forms or register with national tax agencies. These additional steps can be burdensome for globally distributed crypto organizations, potentially limiting their hiring options.

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The Risks of Non-Compliance

Ignoring global labor and tax regulations is a risky strategy for crypto organizations. Non-compliance can lead to fines, back-payments for missed contributions, reputational damage, and even criminal charges for tax evasion. As such, it is essential for crypto organizations to make the effort to understand and comply with the laws in each jurisdiction where they have workers.

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Conclusion

The growth of the web3 industry has created incredible opportunities for crypto organizations and talented professionals worldwide. However, to continue attracting the best talent and sustain their growth, these organizations must recognize and adapt to the regulatory environment that accompanies a globally distributed workforce. By understanding and complying with labor and tax laws in each jurisdiction where they employ workers, crypto organizations can minimize risks, protect their reputation, and ensure a brighter future for the industry.

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Toku can help navigate the complexities for you. Unburden your HR, Finance & Legal teams by partnering with us today. 

Head to our dedicated Toku employer of record page to learn more.

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