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Looking into New Zealand’s recent substantial movement in the crypto sphere
While many are skeptical about crypto, the adoption of cryptocurrency has been evolving and progressing. In particular, crypto payment adoption is getting promising.
Adoption of crypto payments
A surge in the number of companies accepting Bitcoin as payment, including tech giant Microsoft, Starbucks, and Expedia, and over French retail points of sale, indicates support for bitcoin payment by 2020, growing crypto adoption across the globe and pushing cryptocurrencies into the mainstream.
As crypto payments are gaining ground in various countries and as more crypto adoption is expected to infiltrate our daily lives, New Zealand emerges as a recent example of driving complete crypto adoption.
New Zealand’s recent substantial movement in the crypto sphere
In response to the increasing use of crypto assets and rising demand for getting paid in cryptocurrency, New Zealand’s Inland Revenue Department (IRD) published a new ruling that legalizes salary and wage payments in cryptocurrency, clarifying how taxation will be conducted. The ruling is effective for the next three years starting on September 1, 2019.
The substantial ruling comes with more details compared to other similar guidance put forth by countries such as the US and UK. First, this ruling is only applicable to official full-time employees. Second, payments must be a fixed and regular amount, and the value of the crypto asset must be convertible to at least one fiat currency and should not have a “lock-up period”. Employees will follow a ‘pay as you earn income’ tax scheme, just like the tax legislation of regular fiat salaries.
Amid rounds of excitement generated among crypto enthusiasts, some claim the objective of the ruling is just to collect more tax. Because the government still maintains the status of cryptocurrency as an asset only – meaning crypto is still not a currency in their eyes.
Nonetheless, New Zealand has made a vital step in leading the economy to a digital working paradigm and setting an example for other countries. What should we consider when we have a choice?
Is receiving salary in crypto a good idea?
Most obviously, when it comes to crypto, the first thing that comes to mind is its volatile nature, which is also one of its biggest hurdles to mass crypto adoption. Erratic fluctuations in the crypto market are common. Prices can go up and down drastically within a short period of time. Chances are people will have to take the risk of losing their salary in case of a significant price drop. Further, considering crypto payments have just started to gain ground in several countries, and most people believe crypto is still in its infancy, it might be inconvenient for people to spend crypto before it finally becomes the widely accepted medium of exchange.
On the bright side, though, this could be great even if you are not a firm believer in the crypto future. First, Bitcoin is commonly regarded as “digital gold”. Statistics have shown that its prices have surged up 123% for the year, according to data from Messari. Even Goldman Sachs announced Bitcoin as and many predictions have pointed to a further rise in bitcoin’s value in the future.
Think about it, especially at times like this, when global economic recession still looms, receiving wages in crypto may be a better option since it allows hodlers to save more money than keeping fiat money.
On the other hand, for people in political and economic unstable countries, crypto salaries can facilitate them to effectively manage their financial accounts to avoid inflation risks and enjoy fewer cross border payment expenses.
It would be interesting to see how New Zealand manages to deal with potential challenges that come along with this new ruling, such as to hold a robust payroll system that can process payments in cryptocurrency. And it is foreseeable that more compliance actions will arise from other countries following New Zealand’s lead, which will foster the development of mass crypto adoption and get crypto more integrated into our new digital society.
Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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