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Revolut, the $5.5 billion digital bank, has introduced a new “growth shares” program which will serve as the de facto bonus structure for staff based in the UK, Ireland, France, Portugal and Sweden.

The new scheme is designed to lower the tax liability attached to shares held by employees if Revolut goes public or is sold. The startup employs more than 2,200 people globally.

But staff at Revolut have expressed concern over the new structure because of up-front fees of £1.95 and a “hurdle rate” – the price at which the growth shares can be converted into normal shares – of £91 per share. Revolut is offering staff interest-free loans to cover the cost of the up-front fees. 

The growth shares will be subject to a lower rate of tax because of the hurdle. In a blog post on growth shares, the accountancy firm BDO explained that any increase in share value under such schemes is “subject to Capital Gains Tax which is more attractive than income tax.” The firm added that growth shares offer a “significant benefit” to staff in high-growth firms.

The key point, however, is that the £91 per share hurdle rate is the same price paid by investors in Revolut’s $580 million fundraise last year, which valued the startup at $5.5 billion.

In other words, for staff to profit from their bonuses, Revolut would need to go public or be sold at a price far enough in excess of $5.5 billion that the pay-out also covers the up-front cost of purchasing the growth shares and Capital Gains Tax.  

It’s possible that staff could lose money on their bonuses – although it should be noted that Revolut boss Nikolay Storonsky has previously said he would not take the business public until it had achieved a valuation of at least $20 billion.

“We’re aiming to give people a long-term incentive,” said a Revolut spokesperson. “Any long-term incentive is aimed at rewarding people for the future growth of the company and involving them in the future growth of the company.”

Incentive struggle

The introduction of the growth shares is the latest twist in a ten-month struggle to find the right incentivization program for employees.

At the start of the coronavirus pandemic, Revolut tried to cut costs by offering staff the chance to swap part of their salary for share options on a two-for-one basis, meaning £1 of salary could be exchanged for £2 in share options.

But the digital bank ran into difficulty in October when HMRC, the UK tax authority, hiked the price of shares issued under Revolut’s current share option scheme by more than one hundred times – making it more costly for staff to convert their options into equity.

Revolut tried to solve that issue with the launch of an “unapproved share scheme”, allowing companies to set a nominal conversion price, but which also requires staff who exercise their options to pay income tax.

But Revolut’s spokesperson said the firm wanted “to find a way that enables people to be rewarded and doesn’t expose to them high levels of tax.”

The introduction of the growth shares plan is the culmination of a project carried out by EY, the consultancy. Revolut held an online session with EY advisers on February 15, allowing staff to ask questions about the scheme.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin custody and trading services provider NYDIG has filed to create a bitcoin exchange-traded fund, public filings show.

NYDIG’s S-1 filing, published Tuesday, represents the latest salvo in a years-long cumulative effort to win approval for such a product by U.S. regulators. To date, no bitcoin ETF has been approved by the SEC.

NYDIG’s filing notably reveals that Morgan Stanley will serve as the proposed ETF’s authorized participant. If approved, NYDIG’s bitcoin ETF will trade on the NYSE Arca exchange. NYDIG subsidiaries NYDIG Asset Management LLC and NYDIG Trust Company LLC would serve as sponsor and bitcoin custodian, respectively.

“The Trust’s investment objective is to reflect the performance of the price of bitcoin less the expenses of the Trust’s operations. The Trust will not seek to reflect the performance of any benchmark or index,” the filing states.

The full Form S-1 filing can be found here.

In previous conversations with The Block, NYDIG executives have charted an ambitious course of 2021, positioning themselves within the institutional market for bitcoin. 

NYDIG raised $100 million in December for a digital assets-focused fund, as previously reported. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto asset manager Grayscale Investments has expanded its executive team amid an ongoing surge in its assets under management, the firm revealed exclusively to The Block. 

Listen to Michael Sonnenshein’s full conversation with The Block’s Frank Chaparro below:

Grayscale – known for being the largest asset manager in the crypto space – announced three additions to its C-suite. Hugh Ross, a former hedge fund executive who joins from New York-based Horizon Kinetics LLCs, has been named chief operating officer. Benjamin Melnicki is Grayscale’s new chief compliance officer, having joined from Ripple, where he served as regulatory affairs and regulatory counsel for the Americas. Finally, Grayscale has brought in Angela Kuo, formerly of SecondMarket, as chief people officer. 

Newly-minted chief executive officer Michael Sonnenshein tells The Block that the hires come as Grayscale aims to double its headcount — which currently stands at 30 — over the course of 2021. In a new episode of The Scoop, Sonnenshein said that Grayscale is “really looking to expand across its sales team, marketing team, engineering team, ops team.”

Sonnenshein took the reins of Grayscale as CEO earlier this year. Previously, the firm was run by Barry Silbert, who leads Digital Currency Group, its parent company.

That Grayscale wants to grow its ranks is perhaps unsurprising, given a surge in the assets under management across its suite of crypto funds, including the Grayscale Bitcoin Trust (GBTC). Data compiled by The Block indicates that GBTC’s AUM stands above $31 billion.

Grayscale has brought in more than $63 million in February in fees from GBTC as well as the Ethereum Trust (ETHE), according to estimates.

Sonnenshein told The Block that the new hires would help the firm maintain the momentum it rode during 2020.

And the move is perhaps a timely one, given that companies like BlockFi and Osprey are advancing investment funds that could eat into Grayscale’s business.

“We brought in $5.7 billion last year,” Sonnenshein said. “We are launching new products, we are investing in technology, we’re building out the various teams, it’s really about continuing to stay ahead of the growth we are experiencing at really an unprecedented rate.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Israeli payments startup First DAG has built a solution for merchants to accept Diem stablecoin when it goes live sometime later this year.

The API solution will connect merchants to the Diem network to facilitate transactions, enabling their clients to utilize the Diem stablecoin as a payment method.

“We want merchants to be able to accept Diem,” First CEO Ran Goldi told The Block. “So if you are a merchant and you are already working with a payment service provider (PSP) that we have integrated with, you will able to accept Diem without any integrations.”

First will announce the supported PSPs “in the next several months,” said Goldi. As for Diem, Goldi said it should launch “in the next six months.”

To accept Diem, merchants won’t have to know about crypto or blockchain, said Goldi, because First will handle the related processes. Merchants will get paid in their native fiat currencies, he said. As for end-users, Diem will be just another payment method.

“Diem is going to be huge” since Facebook has roughly 2.8 billion monthly active users, said Goldi. Diem, formerly known as Libra, is led by Facebook, and the project has been delayed due to significant regulatory scrutiny worldwide.

Goldi said Diem would be the “easiest” payment method integrated on Facebook’s several platforms such as Instagram and WhatsApp. “You could just click a button and pay with Diem.”

The first version of Diem would be similar to other payment solutions such as PayPal, Goldi told The Block. But in the future, the Diem Association could add more features such as connecting the Diem network with other blockchain networks and a central bank digital currency (CBDC). “Then we will see the real value and benefits from Diem,” he said.

Besides Diem, Goldi said First will also support other stablecoins and a CBDC in the future. 

As for the Diem solution, First has partnered with digital security startup Fireblocks to help safely keep the stablecoins. 

“Diem, through its digital currencies, is set to empower a wider adoption of cryptocurrency and will require the highest levels of security for real-time payments and ensure the safety of funds and financial data of its users,” said Michael Shaulov, CEO of Fireblocks. “To accelerate the adoption of Diem payments, Fireblocks has partnered with First, to provide an easy-to-use platform for licensed providers to launch services supporting Diem.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.