There is no easy answer, but the Property Investors Federation hasn’t heard of any members taking rent payments in cryptocurrency and nor has it had discussions about it across the wider membership.

Federation president Andrew King says accepting cryptocurrency for rental payments does not “sound like a good idea”. “Too little is known about it and it’s volatility is a negative when rent payments have to be made weekly and on-time.”

Facebook’s Property Investors Chat Group NZ has had a nibble around the edges of whether to accept cryptocurrency rent payment. The overwhelming feeling is it has too many risks associated with it.

It might be tempting for some landlords with Bitcoin, the world’s biggest cryptocurrency, trading at about $57,000 a coin and in the past fortnight the value of all coins surging past $2.25 trillion.

However, online rent payments have a strong grip on the industry in New Zealand. Based on comments in the chat group, it’s evident that most people just aren’t confident in cryptocurrency from a rent collection perspective nor do they think it is worth it.

Cryptocurrency’s volatility, unregulated status and limited history are major concerns. During 2018 and 2019 volatility wiped 80% off the aggregate market cap, leading to the collapse of many cryptocurrencies.

In New Zealand many people lost money and/or found their coins had been hacked and stolen. This is a common problem.

Property investors say they prefer to accept rental payments in New Zealand currency – mainly because that is what the bank accepts for mortgage payments.

Bitcoin, for example, is not liquid. It can take up to 10 days to cash out Bitcoin paid by a renter.

It is riskier than cash for other reasons, too. Since it exists only on computers, it is vulnerable to hacking, theft, scams and money laundering.

Bitcoin is made to be untraceable, so there’s no hope of recovering stolen bitcoin. The untraceable nature of bitcoin can create problems if a landlord and a renter get into a dispute about payments.

However, US-based property management software company Innago says the acceptance of cryptocurrency as a rent payment is one of the biggest opportunities for innovation in the rental market, although it is not likely to become mainstream for years or until, at least, it is regulated.

That view is despite lingering concerns over cryptocurrencies’ volatility and usefulness as a method of payment. Moreover, governments are inspecting risks around the sector more closely as the investor base widens.

This is why the Financial Markets Authority (FMA) warns of the risks and why few people are taking cryptocurrencies as rent payments. The FMA says:

• They are high risk and highly volatile – the prices can go up and down quickly.
• They are not regulated in New Zealand.
• Cryptocurrencies, crypto-exchanges and the people that use them are often the target of hacking, online fraud and scams.

The FMA says many overseas cryptocurrency exchanges operate exclusively online, with no connection to New Zealand. This makes it hard to find out who is offering, exchanging, buying or selling. It also makes it unlikely anybody can recover their money if things go wrong.

Also, says the FMA, cryptocurrencies aren’t widely accepted. They have less practical value than money which can be used to buy goods and services. 

If property investors do want to accept rent by cryptocurrency, the FMA suggests making sure any New Zealand exchange used is registered on the Financial Services Providers Register, is a member of the dispute resolution scheme and holds anybody’s New Zealand dollars in a trust account.

Cryptocurrencies have also come under the Inland Revenue Department’s (IRD) eye and it recently released new guidelines.

Paying taxes as a landlord and understanding the related filing obligations is already a stressful process. Throwing cryptocurrencies into the mix won’t make tax compliance any easier on landlords. They cannot use it to avoid paying tax nor hide it.

Inland Revenue spokesperson Tony Morris says that there are no “special” rules for crypto-assets in New Zealand, and the new guidance aims to clarify how normal income tax rules apply to these crypto-assets.

Crypto-assets can be bought, sold, exchanged, mined, and used as a form of payment. They can also earn staking rewards, otherwise known as “crypto-interest”.

“Essentially, crypto-assets are treated as a form of property for tax purposes. What people make from selling, trading or exchanging crypto-assets is taxable,” says Morris.

Tax returns must include crypto-asset income as either other income, business income or self-employed income.

“There are details on how to work out crypto-asset income and expenses; how to calculate the New Zealand dollar value of crypto-assets and information on the accurate and complete records that need to be kept,” says Morris.