The Inland Revenue Department (IRD), New Zealand’s tax office, recently announced that salaries could be paid while using bitcoin or other cryptocurrencies. While it is a first for a country to legalize cryptos in such a manner, the latest decision by IRD could impact the decision of approval or disapproval of bitcoin exchange-traded funds (ETF).
Now, the regulatory body in charge of deciding the fate of bitcoin ETF, the U.S. Securities and Exchange Commission (SEC), could be triggered to rule a decision in favor of crypto enthusiasts. While speaking to BlockPublisher, Shawn McBride, Chief Innovation Officer at McBride For Business, LLC, shed light on the matter. Among several possible outcomes, McBride emphasized:
It may cause some indirect pressure as countries compete for employees and businesses in the high-tech sector. The more mainstream bitcoin becomes the more likely I think the SEC will be to permit uses, capital raises and exchanges of bitcoin.
SEC has been delaying the decision of bitcoin ETFs for quite some time now. A few days ago, the SEC postponed the decision till October 2019. Until then, the regulatory body is examining multiple aspects and scrutinizing different elements of the crypto space.
Although McBride thinks that bitcoin becoming mainstream would impact SEC, Sidharth Sogani, founder and CEO of CREBACO Global Inc, is of the view that approving the bitcoin ETF is indeed suitable for governments. According to him, bitcoin being borderless isn’t capable of being banned. Moreover, he thinks that governments lack in advance technologies required to tax or regulate the bitcoin so regulated ETF is the way to go. While exclusively talking with BlockPublisher in this regard, he said:
ETF were already regulated, CBOE was the first exchange to do that. Its exchange specific. Getting Bitcoin into ETF at Nasdaq and other exchanges will make it less volatile and which will be good in the long run. SEC is ready with ETF and STO regulations and should announce them soon.
Following IRD’s announcement, wages and salaries of Kiwis will be paid in crypto for about 3 years, starting from September 2019. Although the latest development is quite prospective for the future of cryptocurrencies, the framework laid is very strict at the same time. Only the employees who possess an employment contract can be paid with cryptos such as bitcoin. This means that self-employed people surviving in the gig economy couldn’t utilize the cryptocurrencies.
Furthermore, all crypto payments made should be a fixed amount and must be converted back into fiat currency. Categorized as PAYE (pay as you earn) income payments, the payments made in crypto will be subjected to tax.
The respective employer of the company will deduct the tax amount and forward it to the tax department. Following the aforementioned amendments, all the companies who previously used cryptos to avoid tax could no longer escape from tax payments.
However, the latest development is applauded by the crypto community as it assists cryptocurrencies to become mainstream. Ultimately, this model of New Zealand can serve as an example to follow by for other countries as well. McBride concisely explaining the impact of New Zealand’s move summarized:
Anything that allows bitcoin to be in common use will help mass adoption…..In the long term having one creditable country using bitcoin should lead to other countries studying it more and possibly allowing it.
Many countries of the world have stepped into the crypto space and acquired a regulatory framework to regularize cryptocurrencies. While different models are adopted by various countries, there are a few problems common to all.
The volatile nature of cryptocurrencies doesn’t make them an ideal medium of exchange. For instance, no employee holding his payment in cryptos could afford to lose due to a drop in the price of those of cryptos. The cryptocurrencies such as bitcoin are extremely volatile and unpredictable. One day they are hovering around their all-time highs and on the other day they drop to extreme lows. Therefore, only bowing down to the fundamentals of supply and demand, bitcoin’s price is unforeseeable.
Apart from volatility, the hacks and fraudulent practices of bad actors in the crypto space are problematic. People could lose their payments stored in crypto wallets, affiliated with some crypto exchange. With the latest and advanced techniques used by hackers and increasing trend of fraudulent activities, the locals are at a very risk. That’s why, in addition to volatility, hacks and frauds also serve as downsides of cryptocurrencies.
Like the price of bitcoin, the consequences of New Zealand’s move can’t be explored or anticipated completely. For now, there are several possibilities but in the future, it would be easy to notice how making bitcoin mainstream and the decision of bitcoin ETF got helped by legalizing bitcoin for salary payments.