.
A PUZZLING news story popped into my social media feed last week. It announced that the New Zealand government had introduced rules for the payment of salaries in cryptocurrencies and that this had been widely welcomed.
Why on earth, I wondered, would anyone want to be paid in a highly volatile asset that regularly drops its value in double-digit terms.
As I read on it became clear that, like much that relates to cryptocurrencies, this story was not what it seemed.
The people welcoming the move either worked for one of these so-called currencies or were among the small but growing band of disciples who advance the crypto cause with religious fervour.
And the New Zealand government wasn’t endorsing crypto or encouraging its use for salaries. It was just trying to ensure that any profit made on the sale of such assets could be taxed.
That must have come as a blow to some crypto fans who believe the non-monetary nature of these currencies might provide a tax loophole.
In truth, there is nothing certain, but death and taxes and the Revenue will always look for a share of your wealth, crypto or otherwise.
However, the New Zealand move – the UK did the same thing last year – does highlight a future dilemma for tax authorities.
It assumes that, at some stage, the holders of cryptocurrencies must convert them to actual cash, which can be taxed. But what if they start to be used as a real currency?
Austria’s biggest mobile provider announced just last week that it would accept some cryptocurrencies in payment for phone bills.
In Canada, KFC will let you use Bitcoin, the biggest crypto, for home deliveries and some branches of Subway will let you pay the same way for its food.
CheapAir, an American travel agency, accepts payment by Bitcoin and Coinbase. Benfica football club will let you buy a season ticket this way and there is a scattering of other companies who accept crypto.
They are too few to worry about. But the day may come when governments will need to ponder the difficulty of taxing a currency that has no physical presence at all.
For the moment, however, most people who think about cryptocurrencies do so in terms of possible investment.
Conventional currencies have been unpredictable of late and that has sparked some interest in crypto which Wikipedia defines as “a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets”.
If that reads like gibberish to you, I would strongly advise you to leave crypto alone. Ignorance is bliss. If you’ve no idea how cryptocurrencies work, don’t even dream of investing in them.
Even if crypto does make sense to you, it is an investment you should be very wary of. If you buy and sell at the right time, you can make a lot of money out of crypto. But nobody really knows what the rights times are. These currencies go up and down like a yo-yo.
They’re not an investment, they are a gamble – like betting on horses but with no form to guide you.
Like betting on horses crypto can be fun, providing you can afford to lose. If you can’t, then neither sport is for you.
Cryptocurrencies are not for serious investors. Some risk is always necessary for a good return, but it is madness to take so much risk with the possibility of no return at all.
I am wary, even, of less risky schemes which invite investors to put all their eggs in one basket – property, being the obvious example.
My company, the Woodbrook Group of international financial advisers, will always direct clients to well-managed, structured funds.
We recognise that no two people have exactly the same set of circumstances. We aim to match incomes to aspirations by making your income grow as much as possible.
We will aim to make your money work for you – but we won’t ever gamble with it and we will do everything possible to deliver you real, not crypto, rewards.
