Acceptance of Bitcoin and Crypto in New Zealand: A Curious Case

[Darker45]

I've known countries where Bitcoin and crypto in general are legal. In some, it is legal in the sense that it is not illegal; meaning, there are no existing laws which Bitcoin violates, nor laws which are deliberately crafted to make it illegal. While other countries consider Bitcoin legal, it is never accepted as a currency. It may be a security, an asset, a commodity, and so on but never a currency. It may be used as a medium of exchange in selected countries but these countries do not have an explicit law that backs up such set-up.

And then here comes New Zealand. Starting September 1, companies in the country are allowed to pay their employees in Bitcoin or other cryptocurrencies. There are corresponding tax laws on this as well. But here's the condition which I find amazing and encouraging. These cryptocurrencies should be a currency, meaning, that they function as such. It should be, for all its intents and purposes, a money. This is a huge step in mainstreaming the use of Bitcoin and other cryptos in the country.

Sources:
https://www.ft.com/content/54dd4854-bd06-11e9-b350-db00d509634e
https://thenextweb.com/hardfork/2019/08/12/new-zealand-bitcoin-salary-regulation-bad-idea/
https://cointelegraph.com/news/new-zealand-rules-receiving-income-in-bitcoin-is-legal-taxable

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[mk4]

From the 2nd link: "According to the bulletin, salaries must be paid in a crypto-asset that functions like a currency. In other words, the primary function of the coin must be as a replacement for fiat – this should prevent companies from paying employees in illiquid or otherwise small-time altcoins."

So basically it narrows down the options to BTC, BCH, LTC? As those three are the ones in the top 10 that has decent trading volume and are actually made as a currency. Anyway, sounds great then. Though the demand might not be that big, it's still a good start.

[Artemis3]

If i was there i would request bitcoin, but good luck trying to define which coin is which. I understand wanting to get rid of those ICO tokens, but its still going to take "someone" to decide which altcoin is valid and which isn't. Most, consider themselves fiat coin replacements...

[mk4]

I understand wanting to get rid of those ICO tokens, but its still going to take "someone" to decide which altcoin is valid and which isn't. Most, consider themselves fiat coin replacements...

Based on the articles, decent liquidity seems to be a requirement. From that alone, it pretty much already narrows down the options to a few "for-currency" coins that are probably in the top 20. Beyond DASH, trading volumes really aren't good. But yea, I assume most are just going to accept BTC anyway, and probably a few people on some stablecoins.

[Darker45]

So basically it narrows down the options to BTC, BCH, LTC? As those three are the ones in the top 10 that has decent trading volume and are actually made as a currency. Anyway, sounds great then. Though the demand might not be that big, it's still a good start.

Most probably. And perhaps stablecoins? But Bitcoin more than others.

I am looking more into the possible ripple effect of this giant step of a government. I am not sure if this will convert the existing companies but to those start-ups and for the ones whose owners or boards are already leaning on the adoption of crypto, this is a beautiful green light for them. If there are companies paying in Bitcoin, there will be people who are receiving Bitcoin in salaries. And if there are, there will be stores and shops that will accept it. And if these shops are accepting Bitcoin as payment, they will be spending it as well. And this is going to get wider and wider in time. Or so I hope. This is what Satoshi wanted.

[stompix]

From the 2nd link: "According to the bulletin, salaries must be paid in a crypto-asset that functions like a currency. In other words, the primary function of the coin must be as a replacement for fiat – this should prevent companies from paying employees in illiquid or otherwise small-time altcoins."

You missed the row above that:

For one, companies can only pay cryptocurrency to employees working under official employment agreements. Payments also have to be for a fixed amount – “the value of the crypto-asset is pegged to one or more fiat currencies.”

So that narrows it down from the top 10 currencies to...tether
Bitcoin can't qualify for this as its value is by no means pegged to any fiat currency.

I wonder how many exchanges are licensed to operate there, probably having that crypto<>fiat pair traded on a local exchange will be another requirement.

[jseverson]

For one, companies can only pay cryptocurrency to employees working under official employment agreements. Payments also have to be for a fixed amount – “the value of the crypto-asset is pegged to one or more fiat currencies.”

So that narrows it down from the top 10 currencies to...tether
Bitcoin can't qualify for this as its value is by no means pegged to any fiat currency.

Is that really what that means? I read the article and thought that the base salary had to be pegged to a fiat value, not the crypto itself. This would make sense as it protects employees from downswings. It's a ridiculous ruling otherwise.

[mk4]

For one, companies can only pay cryptocurrency to employees working under official employment agreements. Payments also have to be for a fixed amount – “the value of the crypto-asset is pegged to one or more fiat currencies.”

So that narrows it down from the top 10 currencies to...tether
Bitcoin can't qualify for this as its value is by no means pegged to any fiat currency.

Is that really what that means? I read the article and thought that the base salary had to be pegged to a fiat value, not the crypto itself. This would make sense as it protects employees from downswings. It's a ridiculous ruling otherwise.

Though I wasn't 100% sure, this was my understanding too. I mean, it would be weird for them to be mentioning bitcoin then suddenly only allowing the acceptance of pegged cryptocurrencies. Pretty much the wages are still "pegged" in a certain fiat amount, just converted to bitcoin at that moment when the wages are going to be paid.

[stompix]

~

Is that really what that means? I read the article and thought that the base salary had to be pegged to a fiat value, not the crypto itself. This would make sense as it protects employees from downswings. It's a ridiculous ruling otherwise.

Though I wasn't 100% sure, this was my understanding too. I mean, it would be weird for them to be mentioning bitcoin then suddenly only allowing the acceptance of pegged cryptocurrencies. Pretty much the wages are still "pegged" in a certain fiat amount, just converted to bitcoin at that moment when the wages are going to be paid.

Were in a vicious circle here
Then why should they be mentioning pegged to fiat value if we talk about wages which are already being paid in fiat?

LE as I found this:
https://www.classic.ird.govt.nz/resources/8/a/8ae480fc-a266-4e75-8d17-7d6e3b280169/brprd-1902.pdf

This Ruling applies only to salary and wage earners, not self-employed taxpayers; and
where the crypto-assets being paid:
• can be converted directly into a fiat currency (on an exchange); and either:
 a significant purpose of the crypto-assets is to function like a currency; or
the value of the crypto-assets is pegged to one or more fiat currencies.

To me, the value being pegged to a fiat pair means the value is fixed in fiat, not that fixed value of fiat is being converted in cryptos.

But reading pages 6 and 7 of that document apart from just giving me more headaches do indeed say that some cryptos can be used as a money bonus, whatever that is...

First this:

17. In the Commissioner’s view, crypto-assets are property. Crypto-assets are not
“money” as commonly understood (at least not at the present time). In particular,
because crypto-assets are not issued by any government, it is not legal tender
anywhere.

wtf ...

then this

Some crypto-assets are designed to function similarly to fiat currency in the sense
they provide a broad peer-to-peer payment system. Examples are bitcoin and
Litecoin (LTC). Some crypto-assets are designed with other functions in addition to
use as a currency, but the currency’s purpose is still a significant one. Ether is a
common example of this. The Commissioner’s view is that payment in these types
of crypto-asset (where conversion directly into a fiat currency on an exchange is
possible) is sufficiently “money-like” to be a bonus.

How about they skip all this bs and just make bitcoin legal tender and be done with it?  

[Herbert2020]

it doesn't have to be pegged to a fixed fiat to be allowed to be used as payment. the "pegged" part is only one of the possible conditions that the cryptocurrency should have to be in the list. the other possible conditions is being able to be converted to fiat which means it covers bitcoin too and there is no conflict here.

[o_e_l_e_o]

Here is the actual quote from bulletin released by New Zealand's Inland Revenue Department (available here: https://www.classic.ird.govt.nz/resources/1/c/1c6029d0-611c-4a15-9cbf-b712129ab76c/tib-vol31-no7.pdf). Emphasis mine:

The crypto-assets being paid can be converted directly into a fiat currency (on an exchange); and either:
– a significant purpose of the crypto-asset is to function like a currency; or
– the value of the crypto-asset is pegged to one or more fiat currencies.

So it has to be easily convertible to fiat, and either designed to be a currency or a stablecoin. On page 9 of the bulletin above, they specifically mention bitcoin, bitcoin cash, bitcoin gold (lol), and litecoin as "designed to function as an alternative to fiat currency". They also mention ether as being acceptable, as although it is designed with other functions in mind, it still acts significantly like a currency. They also mentioned USDT and PAX as examples of acceptable stablecoins.

It also specifically mentions that they will not accept utility tokens, asset tokens, or security tokens. Although they don't give a full list of what would be deemed acceptable or not, it essentially seems like they are trying to prevent employers from paying their employees in worthless shitcoins.

[JNvak]

You're all discussing the actual crypto that will be given as a salary and I'm sitting in my living room, still amazed that it's possible. Like, don't get me wrong, as a cryptocurrency kiddo fan I've always dreamt of earning in BTC instead of fiats but now I see it can happen and it is happening (not in my country but still). The only thing i've earned in btc was cryptogamble's lottery (and it was quite a bid to be honest, there you have a link, maybe you'll be have more luck: https://www.cryptogamble.com/lottery). It's not the future, it's the present time and I'm super excited! And also congrats to New Zealand!

[elda34b]

I'm still curious as to which companies will actually use crypto to pay for their workers. Most probably companies which operates around cryptocurrencies? I'm not sure if a supermarket wants to buy 10 BTC and then use that just to paid their workers.

[Red-Apple]

You're all discussing the actual crypto that will be given as a salary and I'm sitting in my living room, still amazed that it's possible. Like, don't get me wrong, as a cryptocurrency sympathetic I've always dreamt of earning BTC instead of fiats but now I see it can happen and it is happening (not exactly in my country but still). It's not the future, it's the present time and I'm super excited!

it has been possible to get paid in bitcoin ever since the first block was created back in 2009. to this day, it has not changed. and that is the beauty of this decentralized currency, it does not need approval of anybody to be transferred between "peers" without any middle man.
the governments are not trying to get on board so that they don't fall behind of the revolution.

[serjent05]

I understand wanting to get rid of those ICO tokens, but its still going to take "someone" to decide which altcoin is valid and which isn't. Most, consider themselves fiat coin replacements...

Based on the articles, decent liquidity seems to be a requirement. From that alone, it pretty much already narrows down the options to a few "for-currency" coins that are probably in the top 20. Beyond DASH, trading volumes really aren't good. But yea, I assume most are just going to accept BTC anyway, and probably a few people on some stablecoins.

Well, it is obvious that the New Zealand government are aware that there are only a handful of cryptocurrency that can function a currency because of its liquidity that is probably why they have that condition.  This is also considered to protect employee's and prevent employer to exploit this law and pay their staff with worthless cryptocurrency.

All in all, it is a good development for Cryptocurrency industry and I hope other country will follow New Zealand's lead.

[Baofeng]

So it also means that they have to pay taxes for it, how much is the tax rate in New Zealand?

Tax rates

New Zealand’s top personal tax rate is 33% for income over NZ$70,000. At the other end of the scale, the tax rate is 10.5% on income up to $14,000. For full details, see ‘New Zealand tax at a glance’ below.

Companies and corporates are taxed at a flat rate of 28%.

https://www.newzealandnow.govt.nz/living-in-nz/money-tax/nz-tax-system

But perhaps if you can declare them as capital gains you can get away with some tax leniency, if I'm not mistaken.

[Haunebu]

Thank you New Zealand! This is epic news and I am not surprised to hear that very few countries consider BTC as a currency which would imply that it would compete with their own FIAT currencies.

Once a big portion of the population use crypto, the governments will probably accept it as a currency, but this might still take a lot of time. For example, I am personally using it primarily on crypto sportsbooks as a currency which helps avoid any unecessary KYC.

[jake zyrus]

And then here comes New Zealand. Starting September 1, companies in the country are allowed to pay their employees in Bitcoin or other cryptocurrencies. There are corresponding tax laws on this as well. But here's the condition which I find amazing and encouraging. These cryptocurrencies should be a currency, meaning, that they function as such. It should be, for all its intents and purposes, a money. This is a huge step in mainstreaming the use of Bitcoin and other cryptos in the country.

It's a great progress for New Zealand. But I'm curious if a company would require every of its employee to have crypto or it's a choice for the employees. 'cause I bet, only few would choose crypto (since lot of people still doesn't know crypto).

But regardless of that, if it would gave a positive outcome to them, I hope more company and even the government would do the same.

[vlad230]

It nice to see some countries are moving forward with crypto.

I'm curious how they will get income tax from these employees? Will it be in crypto too and you'll send it to an IRS BTC address?

[Oyarebu]

After New Zealand, other progressive countries will begin to accept crypto and integrate into different spheres of life of their citizens

Definitely, the good news here in New Zealand is that, the employees are not going to be paid in dead coons or token either but will be paid with the first twenty coins on the coinmarketcap and surely its a new development. Before the end if the year we shall see more progress in this regard to other countries. Soon there will be a global adoption.