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New Zealand is the first nation in the world to allow companies to pay salaries in crypto. This is an important move in bringing crypto to the mainstream payment system. Crypto is currently unregulated in large parts of the world. Digital currency users mainly use them to send value without the possibility of being tracked.
What the Ruling Means
The tax authority of New Zealand will allow salaries to be paid using crypto from September 1. However, payments have to be regular and fixed for them to be allowed. Additionally, the crypto coin picked will need to be pegged to a regular fiat coin and it will need to be convertible into a standard currency. In essence, the nation has allowed the use of stablecoins for payments, which is a huge stride forward for the crypto world.
The ruling, which was released on August 7, does not cover self-employed taxpayers in the nation. Those are still barred from earning an income via crypto. When a company decides that it will pay employees using crypto, it will be allowed to deduct tax under the PAYE income tax scheme of New Zealand.
How the Crypto World Received the News
Many in the crypto world were quite excited about this news. Some viewed this as a small but important step into a future where crypto is fully integrated into the economy. According to one legal expert, this move represents another step by governments towards the recognition that people wish to be paid in crypto. The legal expert added that this ruling represented a cultural shift for crypto. He added that it was slowly emerging that most people were willing to deal with their wealth through this relatively new medium.
The difficulty of Regulating Crypto
This ruling by the tax authority shows the difficulty that regulators face when trying to create a legal framework for crypto, which is only about a decade old. The tax authority noted that crypto was still classified as property. It also noted that nowhere in the world was crypto recognized as legal tender. However, for crypto salaries, it would be classified as money. This was because some crypto coins had the characteristics of fiat cash. For instance, they were hard to fake and they were divisible.
The main downside to most major crypto coins is how volatile they are. There have been questions raised about their appropriateness as an investment. In Q1 2019, Facebook added to the excitement in the crypto world by announcing that it would soon launch its crypto-asset called Libra. However, regulators have since raised various concerns about the coin.
Price Fluctuation Could Still be an Issue
However, most experts are wondering about the feasibility of being paid in crypto. This is because of how volatile the prices of crypto can be. For instance, in 2017, the prices of BTC rose to $19,000. However, it has since dropped, at one time reaching as low as $7,000. Currently, it is trading at around $11,500.
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