Lionel Messi, the soccer player with the famed left foot coming to Paris Saint-German, just made quite the play — into cryptocurrency.
As part of his two-year contract with an option for a third year at the renowned French team, Messi is receiving an unspecified “large number” of PSG fan tokens, according to the club.
These are digital assets that, among other things, give ownership of a voting right to certain aspects about the team.
With PSG fan tokens, the owners get a say in naming the year’s best goal, who wins the year-end team award and the motivational message that appears on the dressing room wall.
Italy’s AC Milan and England’s Manchester United, have fan tokens. So does UFC, the mixed martial arts league.
Internally-known soccer teams, like Italy’s AC Milan, and England’s Manchester United, have fan tokens. So does UFC, the mixed martial arts league.
The fan tokens in Messi’s “welcome package” are one part of the 34-year-old Argentine’s two-year contract with an option for a third year at Paris Saint-German that’s reportedly in the range of €25 million to €30 million ($25.3 million to $35.2 million), according to Reuters.
But Messi’s big batch of fan tokens provide a notable look at the emerging way of getting paid via cryptocurrency and digital assets — in professional sports and elsewhere.
In 2020, Russell Okung, an offensive tackle who’s a free agent, said he would put half of his $13 million salary into bitcoin
Last month, New York Giants running back Saquon Barkley said he’ll accept pay for all his future endorsement and marketing deals in bitcoin.
It’s a block against rising inflation, Barkley, the athlete said last month. “You see inflation and you see how high it is right now, and you learn that you can’t save your wealth. So that’s why I’ll be taking my marketing money in bitcoin,” Barkley told The Best Business Show.
New York Giants running back Saquon Barkley said he’ll accept pay for all his future endorsement and marketing deals in bitcoin.
(New government numbers have the inflation rate at 5.4% from July 2021 to the same point last year.)
Meanwhile, approximately 40% of people said they’d consider getting some of their salary via cryptocurrency, according to a May survey of 2,000 people by The Ascent. Around 31% said they’d think about getting their whole compensation via crypotcurrency, the survey said.
Kell Canty, CEO of Verady, which offers cryptocurrency tax-accounting products to individuals and businesses, says in his line of work, he increasingly sees people asking employers for a portion of their pay in cryptocurrency. “It’s being asked for. It’s not being forced on them,” he said.
So do you want to get paid like Messi (even to a smaller degree)? Without some know-how, your tax situation could get, well, messy. Keep these things in mind:
How the IRS views crypto
First off, the Internal Revenue Service views virtual currency as property. If it grows in value and the owner sells more than a year after acquiring, it’s subject to long-term capital gains taxes.
The rate is 15% for many people depending on their income, but it’s currently 20% for high-income earners, plus a net investment income tax of 3.8%.
However, if someone is paid in cryptocurrency, the payment counts as ordinary income, taxed under their existing tax bracket. The value of the payment is measured in U.S. dollars on the date of receipt, the IRS noted.
If you are paid in crypto and you hold onto it? Firstly, the owner will pay income tax and then they will pay long-term capital gains taxes if they sell more than a year later, Canty noted.
The IRS has cautioned that it is becoming an increasingly tough referee on virtual-currency taxation, and the reporting of holdings and transactions.
If gig workers and independent contractors receive crypto in exchange for their goods and services, it’s subject to self-employment taxes, the IRS noted.
Crypto comes with risks
As for the wisdom of getting paid a bit in crypto? Canty acknowledges that given his work, he’s “somewhat predisposed.”
Still, he said, if a person can afford to carve out a very small portion of their pay to crypto, then why not? As long as you are prepared to endure the currency falling as well as rising.
Some advisers have said devoting 2% to 5% to cryptocurrency is a potential play.
‘Crypto is still highly speculative where fluctuations go on a rollercoaster from day to day or even hour to hour.’
— Jordan Benold, a Dallas, Texas-area financial adviser
“If you are young and risk comfortable, some people are doing extraordinarily well with that,” he said.
In fact, Canty added, he knows of companies that paid some workers in the early days of bitcoin . Those employees who held onto the currency were able to retire.
But Jordan Benold, a Dallas, Texas-area financial adviser, advises staying on the sidelines. He does not advise accepting cryptocurrency as compensation.
If he was well-heeled like Messi, he said he may have a different opinion. But for everyone else focused on paying bills and retiring with a sufficient retirement, it’s a bad move, Benold said.
“Crypto is still highly speculative where fluctuations go on a rollercoaster from day to day or even hour to hour,” he said. “I would not want any of my clients riding that ride with their portfolios.”