New Zealand has become the first country to legalize cryptocurrency salaries.
The country's tax agency ruled salaries and wages may be paid in cryptocurrencies so long as the preferred digital coin is pegged to at least one standard, or fiat, currency. New Zealand also requires that the crypto of choice be directly convertible into a standard form of payment.
New Zealand’s Inland Revenue Department has issued a statement which clarifies the matter of cryptocurrencies being used to pay salaries in the country.
According to the document, there are several cases in which employers will be able to pay salaries with crypto assets. This will be possible when they are devised for payments for services performed by the employee under a functional employment agreement, whether it’s for a fixed amount or if it is a regular part of the employee’s remuneration.
Now, this only applies to salary and wage earners. In other words, self-employed taxpayers won’t be able to take advantage of the ruling. Moreover, it won’t be possible if the payment is subject to a lock-up period, and the cryptocurrency must be directly convertible into a fiat currency.
This allows bitcoin — the world's largest cryptocurrency by market cap — to serve as a form of payment for New Zealand workers when the law goes into effect September 1.
The decision was originally filed in an August 7 note, which also detailed New Zealand's plans to allow for bonuses to be paid in cryptocurrency. The salary option will still fall under the nation's income tax scheme, and the ruling excludes self-employed workers from switching their income to cryptocurrency.
The move brings the controversial digital asset further into the realm of everyday payment methods. Cryptocurrencies are relatively free of regulation, and their untrackable nature helped them grow popular with anonymous online purchases. The move serves as "another step towards governments recognizing that actually people are wanting to be paid in" cryptocurrencies, said Thomas Hulme, a solicitor at London-based law firm Mackrell Turner Garrett, to the FT.