Bitcoin and other cryptocurrencies have been on a persistent upswing this year, but they're still pretty volatile. But during a time when even some of the most developed economies in the word are watching their currencies bounce around like the Argentine peso (just take a look at a six-month chart for GBPUSD), New Zealand has decided to take the plunge and become the first country to legalize payment in bitcoin, the FT reports.
The ruling by New Zealand’s tax authority allows salaries and wages to be paid in cryptocurrencies such as bitcoin from September 1, as long as the payments are in regular, fixed amounts. The digital currency of choice must also be pegged to at least one regular currency and must be able to be converted directly into a standard form of payment.
This makes New Zealand the first country to legally support payment in crypto. There are, however, some stipulations: In a bulletin dated Aug. 7, New Zealand’s Inland Revenue excluded self-employed taxpayers from earning incomes in cryptocurrencies, and added that some companies that choose to pay their employees in bitcoin or other crypto will be able to withhold tax under New Zealand’s 'pay as you earn' income tax scheme.
Crypto enthusiasts celebrated the decision on Twitter.
It's also notable that the decision to allow payment in bitcoin comes around the time that the RBNZ slashed its benchmark interest rate by 50 basis points, causing the kiwi to crater earlier this month. The RBNZ's board cited downside risks to inflation and jobs as its reason for the cut. The Kiwi is now near its weakest level against the dollar since 2015. Economists said the dramatic cut appeared to be an attempt by the bank to get out in front of a slowing global economy, since NZ's domestic economic data hardly necessitated such a dramatic action.
Though NZ's tax authorities don't consider crypto money, they did note that crypto has many of the same features as money.
Wellington’s Inland Revenue defined crypto assets as property, noting that crypto assets are not defined as "money" anywhere, and therefore are not legal tender. However, the authority will tax crypto-salaries as money because "some cryptoassets have many of the characteristics of money; for example, being...divisible...and hard to counterfeit."
New Zealand's decision also follows Facebook's introduction of its 'Libra" 'stablecoin', which Facebook intends to use to facilitated transnational payments.
Thomas Hulme, a solicitor at London-based law firm, Mackrell Turner Garrett, said the landmark decision is "another step towards governments recognizing that actually people are wanting to be paid in crypto."
"Some people would rather deal with their wealth in that medium."
Though he added that accepting payment in crypto is "a bit crazy."
But after yesterday's selloff in the Argentine peso, we'd ask: With all the volatility in traditional currency markets, is accepting payment in bitcoin really all that absurd?