Cross-Strait Employment Issues of Hong Kong Blockchain Companies: Form of Employment, Salary Payment

01 Wind from Xiangjiang

On May 31, 2023, the day before Hong Kong's virtual currency exchange licensing system, which was expected by many companies, came into effect, Hong Kong's Securities and Futures Commission issued the "New Licensing Regulations for Virtual Asset Trading Platforms". Circular on the Transitional Arrangement of the System", in the letter, ** clarified that while licenses will be issued on June 1, it also gives a one-year grace period to all exchanges that have officially operated in Hong Kong, ** causing Widely discussed.

The current license issued by Hong Kong is called "Virtual Asset Service Provider License", referred to as VASP (virtual asset service providers). Since June 1, if a new company wants to conduct virtual currency exchange business in Hong Kong, it must Must hold VASP, and exchange companies that have already started their business must also complete the license application within one year. Currently, Hong Kong still has some restrictions on licensed exchange companies. Firstly, it is forbidden to provide services such as lending and leverage to users. Secondly, Hong Kong still has restrictions on listing currencies. Large virtual currencies such as Bitcoin and Ethereum. Therefore, the exchange companies that have actually launched their business must also make business adjustments according to the current management regulations, otherwise it may be difficult to obtain VASP after one year.

However, in general, Hong Kong has a unique location advantage. For many investors, it is far easier to establish a blockchain-related company in Hong Kong than in Singapore and other regions, and it can also make better use of the human resources brought by the mainland. advantages and management cost advantages. It is believed that after the new licensing regulations eliminate the doubts about legal risks, more exchange companies and related blockchain companies will be established in Hong Kong. Towards a cross-strait employment model. **Based on the author’s many years of experience in labor and employment law, here are some perspectives on the possible large-scale cross-strait employment situation and some legal risks.

0****2****** Employment Form Difficulties******

The first difficulty in cross-strait employment is the form of employment. Hong Kong and the mainland are two completely independent legal systems, and the regulations on labor and employment are also completely different. A company registered in Hong Kong and an employee in the mainland Many companies are at a loss as to whether to choose the "employment contract" commonly used in Hong Kong or the "labor contract" established in the Mainland, or whether the two parties sign a "cooperation agreement" or "labor agreement" based on more complicated agreements.

However, companies that choose to bury their heads in progress and put the written contract aside, in short, hire employees to start working on the project, will face other problems: the lack of written agreement leads to the lack of a clear management system between the company and employees, user data, Commercial secrets such as customer records are at risk of not being kept well.

As an emerging industry, the flow of personnel is extremely frequent, and most blockchain companies have no corresponding awareness. Most of the salary agreements and management agreements with employees are based on communication with email or communication software, and no formal agreement has been signed. Obviously, companies are even less aware of the need to sign a corresponding "Confidentiality Agreement" or "Non-Compete Agreement" with employees. This was originally an extremely necessary part of employee management in a mature industry system, especially for employees in key positions. The lack of a sound management system means that it is difficult for companies to take legal measures to protect their own rights and interests in the event of employees leaking confidential information, leaking customer information, or taking away technological achievements developed in the company.

03Salary Payment Difficulty******

The second problem in cross-strait employment is the problem of salary payment. Should the Hong Kong dollars obtained during the business operation process be converted into RMB to pay the mainland remuneration, or simply use the stable virtual currency USDT to pay the employee remuneration? The two options will face their own different legal risks. The former is a difficult problem in which account to accept cross-border account transfers in the Mainland, while the latter not only faces some workers who refuse to accept it, but also has taxes and social insurance that cannot be paid in the form of virtual currency. problem.

**Another risk comes from the currency value. **Comparatively speaking, the risk of using stablecoins such as usdt is small. Enterprises that use other digital currencies will inevitably face the problem of currency value fluctuations. If the currency value fluctuates greatly, the salary of employees will be affected, and employees will also have disputes with the company.

0****4 Tax and social security payment problems

In the previous article "What legal risks are there in the employment of blockchain companies?" ", I also mentioned to you that ** cross-border payment of salary still faces tax risks. **Enterprises have the obligation to declare personal income tax for individuals, but the blockchain enterprises whose main body is not in the country cannot fulfill the corresponding obligations. Even if some enterprise projects are related companies registered in China, the main business of the project is still by foreign entities. The relevant domestic companies are not responsible for the payment of salaries, nor can they fulfill the corresponding obligations.

A similar situation is the payment of social insurance. The payment of social insurance is also an obligation of enterprises within the legal scope of our country, and it is different from taxation. It is also the demand of many employees. At the same time, the functions of insurance itself, such as medical insurance and industrial injury insurance, are also used by employees in their daily life. When nothing happens, the company negotiates friendly with its employees, and the risk of not paying social insurance may not be exposed. However, if an employee has an accident, such as a sudden illness on the way to work, a traffic accident, etc., the company will face a major risk of not paying insurance.

Whether to formally cooperate with mainland human resources companies to complete employee management, taxation, social security issues, whether to establish office locations in the mainland, etc.. These are all problems that companies need to face and solve in the process of employing people.

I believe that with the approval of the VASP license application, in the next three to six months, a large number of blockchain-related companies will be established in Hong Kong, and various legal issues will also arise. At that time, the author will also pay attention to each company The future development of blockchain enterprises in Hong Kong.