Bitcoin holds as Michigan payroll bill tests IRS, FLSA

Michigan is weighing a proposal described as allowing employee pay in bitcoin  BTC -2.81% . Key particulars remain unclear, so this explainer focuses on what can be verified and the regulatory guardrails that would govern any crypto payroll.

The practical stakes are wage-and-hour compliance under federal law and how taxes must be withheld and reported if compensation is delivered in digital assets. Employers and workers should expect existing federal rules to apply regardless of any state-level initiative.

Michigan bitcoin payroll bill: what’s verified and what isn’t

A measure attributed to Michigan State Rep. Matt Maddock has been described as enabling employees to be paid in bitcoin and including a prohibition clause that has not been specified. As of publication, the bill number, full text, and committee path have not been publicly detailed in accessible materials reviewed.

Because the operative language is not yet available, several fundamentals remain unverified: whether participation would be opt-in, which categories of workers would be covered, whether public employers are included, how minimum wage would be benchmarked in U.S. dollars, and whether automatic crypto-to-fiat conversion would be required. Clarity on those points will determine how the proposal interacts with federal wage-and-tax rules.

Until the text surfaces, references to scope, timelines, or prohibitions should be treated as provisional. Verification should include bill enrollment details, introduced text, and any fiscal or committee analyses once posted to the legislative tracker.

Why this matters: FLSA minimum wage compliance, IRS crypto tax withholding

According to the U.S. Department of Labor, the Fair Labor Standards Act requires employers to ensure minimum wage and overtime are met; paying in a volatile asset raises the risk that, at payout, the U.S. dollar value could fall below required thresholds. Employers would need reliable U.S. dollar benchmarks for each pay period to validate compliance.

According to the Internal Revenue Service (IRS), digital assets are treated as property for federal tax purposes; wages paid in crypto are taxable at their fair market value in U.S. dollars at the time of payment, with withholding, deposit, and reporting performed in dollars. That means payroll systems must capture valuation timestamps, apply dollar-based withholding, and issue year-end forms reflecting U.S. dollar amounts.

Legal practitioners flag execution risks that sit alongside regulatory rules. As reported by Bloomberg Law (2025), “A crypto payroll comes with legal barriers and financial risks.”

How crypto payroll could work and Michigan’s related bills

Employer implementation basics: USD benchmarks, opt-in, conversion, custody, records

A pragmatic implementation typically pegs each employee’s wage to a fixed U.S. dollar amount, then converts that dollar obligation to bitcoin at payout using a time-stamped rate, preserving the dollar benchmark for FLSA auditing. Opt-in consent, with the option to revert to dollars, helps mitigate misunderstanding and employee-relations risk.

Operationally, employers often withhold and remit taxes in dollars while delivering net pay in bitcoin, which requires converting enough crypto to cash for tax deposits or funding taxes directly in cash. Clear custody choices, on-chain to an employee-provided wallet, or via a regulated intermediary, and written disclosures about keys, reversibility, and fees reduce disputes.

Recordkeeping should capture valuation sources and timestamps, conversion rates and fees, wallets used, and confirmations, so wage-and-hour and tax records match the U.S. dollar figures on pay stubs and year-end statements. Volatility controls, such as immediate conversion upon receipt or capped crypto pay percentages, can reduce underpayment risk if prices swing intraday.

Policy context in Michigan: HB 4510 and HB 4511 momentum

Separate from payroll, House Bill 4510 would allow Michigan public employee retirement systems to allocate up to a small percentage to crypto via exchange-traded products issued by regulated investment companies; as reported by the American Society of Pension Professionals & Actuaries, the design seeks constrained exposure within existing prudence frameworks (https://www.asppa-net.org/news/2025/12/will-michigan-public-employee-retirement-system-funds-be-invested-in-crypto/).

House Bill 4511 has been described by the Michigan Bitcoin Trade Council as a “Bitcoin Bill of Rights,” aiming to prevent state-level bans on holding digital assets or imposing certain licensing requirements on ordinary users, reflecting broader advocacy for digital asset protections (https://www.mibtc.org/hb4511).

At the time of this writing, Bitcoin (BTC) is about $63,355, a snapshot that underscores the volatility backdrop policymakers and payroll teams would need to manage if wages are paid in crypto.

Last updated: 2026-02-24