A simple answer is a No. Bitcoin, or any other cryptocurrency in the UAE for that matter, is still not recognized as a legal tender for payment. One exception has been revealed solely as a result of the terms that were established during the recruiting process. A UAE company pledged to pay monthly salaries in fiat currency and 5,250 EcoWatt tokens. It later failed to settle digital tokens, forcing employees to take the matter to court.
The court ultimately ruled that the company was bound to fulfill the commitment. As a result, it should clear its six-month cryptocurrency debt.
Nevertheless, many believe that this verdict has laid a foundation for future payments wherein companies will be able to pay salaries in cryptocurrencies, including Bitcoin. The industry that deals with digital assets is more likely to witness this development. Additionally, the contract must include this information to ensure comprehensive clarity and comprehension of the settlement.
What makes the usage of crypto unsafe is the ever-changing value of digital tokens. The value of, say, BTC is $59,000 at the time of signing the contract. It could later change to $35,000. Thereby, registering a loss for employees. Rather, it can be leveraged to issue bonuses and incentives to employees. That is more likely to be a win-win approach.
Companies that do roll out payments in cryptocurrencies are likely to hire individuals with a better understanding of cryptocurrencies and sufficient risk appetite to accept the modern form of payment.
The UAE is in the process of implementing its own central bank digital currency, Digital Dirham. Its utility is unclear, but it could soon serve as a stablecoin for the region. Dubai adopted VARA in 2022 to create a framework around the cryptosphere. The idea was to protect investors and facilitate international standards for the industry.
UAE employees will be paid in cryptocurrency, but only in certain circumstances. It remains to be seen how other companies would respond to the situation. It will be necessary for them to carefully create contracts and discuss them with candidates before hiring them. The Wage Protection System (WPS) regulates employee salary payments. It oversees the timely payment of salaries. Crypto salaries may encounter challenges, as they are not fully recognized in the WPS Ministerial Resolutions. Businesses that disregard pertinent resolutions may face penalties and/or fines.
Hala Harb, an associate at BSA Ahmad Bin Hezeem & Associates, believes that crypto salaries will be more popular among companies that operate within the confines of the virtual asset sector. If there are any additional fees associated with digital currencies, employers will be required to specify the payment schedule and address.
Apart from volatility, they must keep in mind that conversion via banks is one potential difficulty.
Banks may encounter difficulties when converting cryptocurrencies to fiat currency. The converted rate may be either higher or lower than the agreed-upon price. Therefore, it will be necessary to include adjustment clauses in contracts.
Agreements that include cryptocurrency payments are likely to attract restrictions. Experts recommend that agreements or employment letters must have a disclaimer that outlines risks associated with cryptocurrencies. This pertains to volatility and fluctuations, which could affect their income every day.
UAE may not completely implement payments in Bitcoin tokens, but it is worth noting that there are steps in place to resolve a conflict if it ever arises. Crypto salaries are real and could soon happen, but the associated risks draw a boundary. Natalie Jones, a partner at DLA Piper, reiterated that it is difficult for employers and employees to agree on specific payment terms for crypto. Hence, a more logical approach will be to use digital currencies to pay compensation or bonuses.
At present, salaries can only be established in fiat currencies. Details must be submitted to the appropriate labor authority, and this could include USD or AUD, to name a few.
Companies must adhere to WPS to ensure timely payments through authorized channels such as WPS into a local bank account. Salaries paid through cryptos will not be compliant with that mechanism.
The UAE is currently discussing the Court’s decision, which mandates that the company pay its six-month dues in cryptocurrency. It certifies the use of digital currencies as a legitimate payment method, but it does not inherently enforce it throughout the region. It will require time for decentralized currencies to be implemented in all regions of the globe, not just the UAE.
Stringent regulations are imposed on cryptocurrency due to their high volatility, which is most influenced by even minor fluctuations in economic conditions. This is substantiated by the demand-supply mechanism of digital currencies, which provides a finite number of blocks. The price is influenced by each deposit and withdrawal. Therefore, it is natural for economic conditions to influence the price of digital tokens.
The ongoing legal case will lay the groundwork for future projects or companies that are looking to pay their employees in crypto or Bitcoin. Payment of an entire salary may not be a reality, but a portion of it could happen in the form of bonuses. Contracts will play a more significant role, and employees will need to understand how they work, as the current value may not align with their expectations.
The UAE Central Bank has released crypto regulation guidelines that will mature in the next year. That will introduce more practical use cases for cryptocurrencies in the country. Interestingly, in a 2023 case, the court denied settlement in crypto due to valuation issues.