Internet Party outlines government-backed currency
The Internet Party has shed more light on its proposed "government-sponsored digital currency" unveiled last week.
Party chief executive Vikram Kumar said he envisaged transactions in the digital currency would be taxed.
Many people associated digital currencies with Bitcoins, he said. "The fundamental concept is very sound. They are safe, secure and encrypted."
But a government-backed digital currency could be more trusted and could be subject to conventional policy mechanisms such as monetary policy, he said.
One attraction of bartering and making and accepting payments in non-official currencies is that they can be used to avoid tax.
That is unless or until they become popular and tax authorities move in. The United States Inland Revenue Service said in a ruling last week that Bitcoins would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the circumstances.
Kumar said he did not envisage The Internet Party's proposed currency would sit outside the tax system.
"It would just be treated as we would normal transactions. Whether a transaction happened in New Zealand dollars, US dollars, Bitcoins or any other digital currency, we should focus on the transaction and include that in our taxation systems," he said.
Massey University banking expert David Tripe was scathing, saying New Zealand dollars were already a digital currency that was widely used online.
"Why would we need two digital currencies when we have already got one? Why we would want another to compete with it?
"What tends to happen in that sort of situation is the currencies get a little misaligned with each other and the one that is less reliable drives out the one that is more reliable. It is something called Gresham's Law that was described in the reign of Elizabeth I," he said.
Kumar said a digital currency could let people circumvent higher fees charged on credit card transactions.
But he said there would be other benefits and denied it would simply duplicate the existing currency.
"The Internet Party sees an opportunity to have government-backed thinking," he said.
- Fairfax Media
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