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Bitcoin (BTC) has long had a reputation as the currency of choice for criminals eager to receive payment in a hard-to-trace form. Recent reports suggest this is changing, with other privacy coins becoming increasingly popular with the underground, but it also obscures the fact that there are actually many legitimate ways for businesses and individuals to get paid in cryptocurrency.
From online payment systems designed to make it easier to buy and sell using BTC, to companies and job-seeker platforms providing payment in cryptocurrency, there are plenty of reasons why you might want to receive payment in the form of digital currency.
When the Pyeongchang Winter Olympics kicked off in February 2018, Canadian speed skater Ted-Jan Bloemen made headlines for becoming the first athlete to be paid in cryptocurrency. The arrangement was part of a sponsorship deal with ONG Social, a social network and crypto community, and virtual reality provider CEEK VR.
Elsewhere, more than 4,000 employees at Japanese Internet firm GMO Group have the option to receive a portion of their salary in bitcoin, while plenty of other companies in the crypto sphere have been offering bitcoin salary payments for years. And when you consider that cryptocurrencies are designed to offer a viable replacement for fiat currency, this makes sense.
There are even several job-seeking websites designed to allow freelancers to find work and get paid in cryptocurrency. For example, Ethlance allows its users to hire or work for Ether (ETH), while Coinality aims to connect employees and job seekers with job opportunities that pay in digital currency.
If you currently have a job, you could also ask your employer whether it’s possible to get a portion of your salary paid in Bitcoin. However, with many employers wary of paying in cryptocurrency, you may have to explore other options. One example is Bitwage, which specialises in converting fiat currency salaries into cryptocurrency, but is currently only available on payments from UK, US and European employers.
At the time of writing, the New Zealand Inland Relevant Department says that if an employee receives their salary, or part of their salary, in BTC, the remuneration is treated as normal salary or wages. The employer will need to satisfy their PAYE taxation obligations as they usually would when paying with fiat currency.
One of the key ways investors can earn money from shares is to buy stock in a company that pays dividends to shareholders. This practice is mirrored in the crypto world, as some cryptocurrencies also pay dividends to coin or token owners.
The two most common ways to access dividends are by:
For example, NEO holders are rewarded with GAS, the fuel used to power the NEO blockchain network. With every new block generated, eight GAS are distributed for all 100,000,000 NEO.
Another example is Komodo (KMD), which pays an annual reward rate of 5% to KMD holders, while Nav Coin (NAV) also pays up to 5% interest to users who stake their NAV holdings.
In this way, some cryptocurrencies provide added value to buyers, providing the opportunity to earn a passive income from your crypto holdings.
Take a look at the table below for a round-up of some of the most well-known dividend-paying coins.
| Coin | Dividend | |
|---|---|---|
| NEO (NEO) | GAS token paid out with each new NEO block, proportional to the amount of NEO held. | Learn more |
| Komodo (KMD) | 5% interest earnt on KMD holdings, paid annually. | Learn more |
| KuCoin Shares (KCS) | Fees collected on the KuCoin exchange are paid out to holders daily, proportional to the amount of KCS held. | Learn more |
| BridgeCoin (BCO) | 50% of profits from the Crypto Bridge decentralised exchange are paid out to holders who stake their coins, depending on the amount of BCO held. | Learn more |
| Neblio (NEBL) | 10% interest earnt on NEBL holdings for those who stake their coins. | Learn more |
| PIVX (PIVX) | ~4.8% interest earnt on PIVX holdings for those who stake their coins. | Learn more |
| Nav Coin (NAV) | Up to 5% earnt on NAV holdings for those who stake their coins. | Learn more |
Mining is the process by which cryptocurrency transactions are validated, and miners are rewarded with cryptocurrency for their efforts. Mining is done using special mining programs and uses the processing power of the miner’s computer. It’s a slightly confusing concept to wrap your head around at first, so check out our guide to Bitcoin mining for an in-depth explanation.
These days it’s quite difficult to make money mining Bitcoin, as the process now requires specialised equipment, significant processing power and a whole lot of electricity. However, there are plenty of other cryptocurrencies that can be mined, including Ether (ETH), Zcash (ZEC) and Monero (XMR). While mining isn’t an easy way to earn a second income, it can be a useful hobby to help you earn additional funds.
Learn more about how mining works in our handy guide.
However, it’s also important to be aware of the tax treatment of mining Bitcoin in New Zealand. If you operate a Bitcoin mining business, any income derived from the transfer of the mined Bitcoin to a third party must be included in your assessable income. The expenses you incur as part of the mining activity can be claimed as deductions, while any losses may also be subject to the non-commercial loss provisions.
At the time of writing, the IRD also classifies as trading stock any Bitcoin held by a taxpayer carrying on a business of mining and selling Bitcoin, while GST is payable on the supply of Bitcoin made as part of any Bitcoin mining enterprise.
There are plenty of other ways you can potentially earn small amounts of cryptocurrency, including:
Read more on this in our guide to some of the ways to earn crypto for free.
If you think getting paid in cryptocurrency sounds like a pretty sweet deal, make sure you’re aware of all the risks and potential downsides:
Visit the IRD’s guide to cryptocurrencies for more information or contact them directly on 0800 775 247 (personal tax) or 0800 377 774 (business tax).
Before getting paid in cryptocurrency, it’s essential to be aware of the tax treatment of cryptocurrency by the IRD. Key points include:
Images: Shutterstock
Disclosure: At the time of writing, the author holds IOTA and XLM.
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