Last month, New Zealand became the first country to fully legalise salary payments in cryptocurrencies. The ruling came into effect on September 1st, 2019 and will last for three years.
The Inland Revenue Department, who announced the decision in a bulletin released on August 7th, states that as long as the cryptocurrency is fixed to a standard or fiat currency and convertible to standard payments, it can be used for wages, salaries and bonuses.
This means that some cryptocurrencies will not be accepted. As the bulletin states, “Crypto-assets that cannot be converted or sold by the employee for a material period of time after payment does not sufficiently resemble a payment of salary or wages”.
Self-employed and freelance workers were excluded from the decision, and still must be paid in standard currency.
The IRD ruling is a major move towards normalising the digital assets in everyday use. Cryptocurrencies have been in use since 2009. They have yet to gain mainstream popular use but they are popular with anonymous online shoppers since they are largely untraceable and generally do not fall under the purview of government regulations.
Cryptocurrencies have also had a rocky ride since their inception and are still widely considered to be volatile investments. Bitcoin – the world’s largest and most well-known cryptocurrency – recently hit a 19-month high. But this is still 42% lower than its December 2017 pinnacle price of almost $20,000 per coin.
New Zealand is paving the way for other countries – the UK, Australia, Portugal, and others – who have taken steps towards legalising cryptocurrency payments. The United States, however, will not be following suit anytime soon, as Donald Trump has explicitly tweeted about his dislike for Bitcoin and other cryptocurrencies, saying that their value is based on “thin air” and that they facilitate unlawful behaviour “including drug trade and other illegal activity”.
New crypto sources
Two months prior to New Zealand’s decision, Facebook announced its own cryptocurrency – the Libra. Facebook has been embroiled in privacy scandals of late and the Libra will face close scrutiny from governments and investors alike. But, the social media behemoth’s decision to get into cryptocurrency was largely seen as move that will increase the technology’s mainstream acceptance.
According to some reports, after five years of research and development, the People’s Bank of China (PBOC) will also soon be releasing its own cryptocurrency. Ordinary cryptocurrencies are based on blockchain technology, and as such, are decentralised. The PBOC’s offering, on the other hand, will be tightly controlled by the government.