Home » Cryptocurrencies And Tokens To Be Regarded As Securities In New Zealand As Per Regulator
By KryptoMoney Staff November 4, 2017
Financial Markets Authority (FMA)of New Zealand recently announced that businesses which issue cryptocurrencies and tokens in exchange of investment shall be deemed to be issuing securities. FMA said that:
“A security is any arrangement or facility that has, or is intended to have, the effect of a person making an investment or managing a financial risk. If appropriate, we can designate any security to be a particular financial product based on its economic substance.”
Thus such crypto forms shall be given the tag of being a security irrespective of them coming under the definition of being a financial product or not.
Usually cryptocurrencies and tokens are classified as an equity security, a debt security, a derivative or a managed investment product dependant on the “specific characteristics and economic substance” which the particular asset has to offer. Business houses of New Zealand have to meet the requirement parameter of various regulatory benchmarks for issuing the same. FMA clearly mentioned that businesses issuing cryptocurrencies and tokens which are not a financial product or service need to comply with the country’s Fair Trading Act. The legislation shall apply to domestic offerings as well as “overseas-based tokens and cryptocurrencies offered in New Zealand.”
Also Read:Cryptocurrencies Could Bring Financial Stability says President of Central Bank Of Turkey
Issuers of such tokens or cryptocurrencies in New Zealand also have to comply with a few more regulatory requirements such as paying related fees for financial services provided, getting a formal registration, complying with anti-money laundering and ‘fair dealing’ and rules and becoming a member of the dispute resolution scheme while providing services to retail customers. Such fair dealing rules totally “prohibit misleading conduct and deceptive statements being made in relation to financial services”, according to FMA.
ICO or Initial Coin Offers are gaining popularity as a mechanism of raising corpus. Usually business houses come up with a digital token like their exclusive proprietary virtual currency and then begin the hunt for investors who would purchase the same in return of cryptocurrencies like Bitcoin, Ripple, Ether etc rather than fiat options like Euros, Dollars or Pounds.
Blockchain mechanism is used for recording such token trade. Investors can make use of peer-to-peer exchange platforms for selling such tokens at profit provided its value increases. They are even encouraged to buy such tokens and are being awarded with a share of profit of the business ventures which benefit from such investments.
The FMA agreed to the fact that ICO activity in New Zealand can help business houses to “determine if tokens are ‘financial products’, and, if so, whether any exemptions are appropriate”. It can also exempt certain businesses from following regulatory obligations in regards to their ICOs, “to promote innovation and flexibility in our financial markets”.
“We want to play our part in making markets work, and greater regulatory scrutiny of token offers may be necessary to ensure this innovation can become a sustainable method of fundraising. Our focus is to enhance New Zealand’s reputation by promoting fair, efficient and transparent financial markets,” the FMA said indicating that it is open to industry suggestions regarding addressing the ICOs in future.
Also Read:Abu Dhabi Issues Guidelines for ICO Regulations
Financial authorities across the globe has given mixed reaction to the ICO market growth. Those in Singapore and US offered detailed views on ways to apply existing regulations to ICOs and the Hong Kong’s Securities and Futures Commission (SFC)outlined the positioning of the same in its regulatory framework. However, UK’s Financial Conduct Authority (FCA) have issueda risk warning to consumers in September over ICO investment. South Korea and China have completely banned ICO trading spreading shockwaves through crypto world.
Financial Market Supervisory Authority (FINMA), a Swiss regulator recently issued an ICO guidance and confirmed that it is “investigating a number of ICO cases to determine whether regulatory provisions have been breached”. Yvonne Dunn, a Financial services and technology law expert working at Pinsent Masons pointed out that the banning of ICO’s cannot be the ultimate solution to solving its inherent problems.
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FAQs
Yes, buying cryptocurrency is legal in New Zealand. In fact, cryptocurrency is largely accepted in the financial sector owing to the country's technology-neutral legislation. However, it is worth noting that cryptocurrencies are still not considered legal tender in New Zealand.
Is cryptocurrency regulated in New Zealand? ›
Buying cryptocurrency is legal in New Zealand, with the FMA regulating cryptocurrency-related organizations under various acts. However, cryptocurrencies are not considered legal tender.
Does New Zealand tax cryptocurrency? ›
How are cryptocurrencies taxed in New Zealand. In New Zealand, you are taxed on your income from mining, staking, selling, or trading cryptocurrency. You will have to pay taxes based on your income tax bracket of 10.5% to 39%. However, you can offset your cryptocurrency losses from your other income sources.
Will crypto be regulated as securities? ›
Securities and Exchange Commission (SEC): The SEC oversees the issuance and sale of securities, including digital assets that meet the definition of securities. This means cryptocurrencies that meet the criteria to be considered securities must be registered with the SEC and comply with its regulations.
Are crypto tokens regulated? ›
If the crypto-asset issued by the ICO is a financial product (such as an interest in a managed investment scheme or a security), the issuer will need to comply with the relevant capital raising provisions of the Corporations Act, AFS licensing requirements and other regulatory requirements.
Is cryptocurrency accepted in New Zealand? ›
Yes, buying cryptocurrency is legal in New Zealand. In fact, cryptocurrency is largely accepted in the financial sector owing to the country's technology-neutral legislation. However, it is worth noting that cryptocurrencies are still not considered legal tender in New Zealand.
Is Binance regulated in New Zealand? ›
Is Binance regulated in New Zealand? Yes - Binance became a registered Financial Services Provider in September 2022.
Is cryptocurrency property NZ? ›
How is cryptocurrency taxed in New Zealand? In New Zealand, cryptocurrency is considered a form of property subject to income tax.
Which country does not tax crypto? ›
Several countries have no crypto tax, allowing individuals to buy, mine, and trade crypto without tax implications. Some notable examples include Belarus, Bermuda, Cayman Islands, El Salvador, Georgia, Germany, Hong Kong, Malaysia, Malta, Puerto Rico, Singapore, Slovenia, Switzerland, and the United Arab Emirates.
Is a crypto token a security? ›
In its decision, the court ruled that the transactions in question, which concerned crypto tokens created by Terraform, were investment contracts under SEC v. Howey, and therefore securities under the Securities Act of 1933.
The Securities and Exchange Commission, the Chicago Mercantile Exchange, the Commodity Futures Trading Commission, and the Financial Industry Regulatory Authority are all involved in some regard. Cryptocurrency transactions between private users—private wallet to private wallet—are not regulated.
Are tokens considered cryptocurrency? ›
A “token” often refers to any cryptocurrency besides Bitcoin and Ethereum (even though they are also technically tokens). Because Bitcoin and Ethereum are by far the biggest two cryptocurrencies, it's useful to have a word to describe the universe of other coins.
What is the difference between a token and a cryptocurrency? ›
The key differentiation between the two classes of digital asset is that cryptocurrencies are the native asset of a blockchain — like BTC or ETH — whereas tokens are created as part of a platform that is built on an existing blockchain, like the many ERC-20 tokens that make up the Ethereum ecosystem.
Are tokens securities or commodities? ›
On the other hand, token types like security tokens are classified as securities because they represent shares of projects or a company. The Howey Test is a set of criteria that determines if an asset should be classified as a security or commodity in the United States.
Can you trade crypto in NZ? ›
We make it easy for Kiwis to buy, sell and swap crypto in NZ
We are a non-custodial exchange - your crypto is your crypto - you choose where you keep your assets safe. Buy crypto in NZ safely and securely with no hidden fees. Payment options include credit card, bank transfer and online EFTPOS.
Can you withdraw crypto to NZ? ›
If your holdings are currently in crypto or US dollars, you must sell them into New Zealand dollars before withdrawing to your bank. Find step-by-step instructions in our help article Selling crypto. Dashboard, select Withdraw, then select New Zealand dollars. Select your bank account.
Does New Zealand use blockchain? ›
Karura Apps (Product of Acala), SubQuery and more Blockchain companies in New Zealand from the F6S community. Blockchain forms part of the Finance industry, which is the 3rd most popular industry and market group.
