Former hedge fund manager and Mad Money host Jim Cramer has made his stance on bitcoin known. What is his current stance on the cryptocurrency?
In light of business intelligence firm MicroStrategy announcing that it's paying non-employee board members in bitcoin, Cramer showed his own enthusiasm for the alternative compensation.
Why Jim Cramer would accept bitcoin as payment
MicroStrategy already held bitcoin as its primary treasury reserve. Now, the company announced an unscheduled corporate change in the form of an 8-K, which states that as of April 11, non-employee board members will receive modified compensation arrangements.
MicroStrategy's form states, "Going forward, non-employee directors will receive all fees for their service on the company’s board in bitcoin instead of cash. In approving bitcoin as a form of compensation for board service, the board cited its commitment to bitcoin given its ability to serve as a store of value, supported by a robust and public open-source architecture, untethered to sovereign monetary policy."
Cramer addressed the change during an appearance on CNBC's Squawk Box. He said, "Do I want to be paid in bitcoin? I think that you can pretty much quickly transfer that to dollars if you want so it's a much more fluid market than a year ago. So I get it."
Even when pressed about a scenario where he'd have to ride out the bitcoin market rather than trade in for cash value, Cramer still said that he would take bitcoin as compensation. He said, "As a matter of fact, I may demand it."
Cramer talks Coinbase amid bitcoin news
During the week of April 14, Coinbase, a U.S.-based cryptocurrency exchange platform, is heading for an IPO. Cramer seems eager for the debut. He said, "You gotta buy Coinbase when that deal comes even though it's a $100 billion deal. This has become common knowledge that there are many companies that are going to switch."
Clearly, his own stance on cryptocurrency extends beyond the blockchain market itself and into the traditional stock market. Cramer believes that returns are inevitable in "a $2 trillion market, maybe going into $3 trillion."
Cramer contemplates taxation on bitcoin compensation
Cramer talked about the potential taxation loopholes that a cryptocurrency payment could provide. He said, "Do you think it could be switched from ordinary income to capital gains? Because holy cow."
Ordinary income is taxed at a higher rate than long-term capital gains (which apply to securities held for a year or more). Depending on your tax bracket, long-term capital gains can be taxed at 0 percent, 15 percent, or 20 percent. Currently, income tax ranges from 10 percent–37 percent depending on income.
High earning individuals could save major dough on taxes if bitcoin earnings were to count as capital gains rather than ordinary income. Currently, bitcoin is classified as property in the U.S. and any returns count as capital gains. MicroStrategy is the first to make this move, but if it becomes widespread, you can expect the SEC and IRA to get involved.
"MicroStrategy's always been the leader," Cramer says, but trailblazers often make way for new legislation.