New Zealand Cryptocurrency Laws Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
No legislation exists specifically regulating cryptocurrencies in New Zealand, but contract and tax laws apply to cryptocurrency.[1] For instance, in 2018, the Inland Revenue Department (IRD) stated for tax purposes, cryptocurrencies are treated as property and taxes should be paid on gains from selling cryptocurrency if the purpose of buying and selling was for resale (same framework for trading gold in NZ).[2] Additionally, cryptocurrencies are not legal tender in New Zealand, but cryptocurrency exchanges, brokers, wallet providers, and businesses offering ICOs and investment opportunities are regulated in New Zealand because they are treated as financial services by New Zealand’s Financial Markets Authority (FMA).[3] These businesses must obtain a license from FMA.[4] Applicable laws include the Financial Markets Conduct Act 2013 (FMCA), Anti-Money Laundering and Countering Financing of Terrorism Act 2013, and the Financial Service Providers Act 2008 (FSPA).[5] Crypto Money Service Businesses based in New Zealand must comply with FSPA.[6] The Department of Internal Affairs oversees AML obligations, and additional obligations apply to exchanges under the Financial Advisors Act. ICO’s are analyzed on a case by case basis to determine the applicable regulatory framework. The token will be classified as involving a debt security, equity security, managed investment product or derivative under the FMCA.[7] Four considerations are relevant: 1) if the crypto asset is a financial product/security token; 2) if the business provides a financial service; 3) the sophistication of the purchaser, either a member of the general public or investor; and 4) if the investor is based in New Zealand or oversees. [8] ICO’s offering a crypto asset classified as a financial product under the FMCA must register with the Financial Service Providers Register and comply with AML and fair dealing requirements under Part 2 of the FMC Act prohibiting deceptive advertisements and practices.[9] Simply stated, New Zealand analyzes crypto businesses to determine the financial product offered and applicable laws the business is subjected to.
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
[1] Cryptocurrency World Survey, New Zealand, https://www.loc.gov/law/help/cryptocurrency/world-survey.php#_ftn450
[2] Alexandra Sims et al., Regulating Cryptocurrencies in New Zealand, The Law Foundation New Zealand, 78-81, 79, (Sep. 2018), https://www.interest.co.nz/sites/default/files/embedded_images/Sims%20et%20al%20ILAPP%20Cryptocurrencies%20Findings%20Final%20Report%20Sep2018.pdf;Cryptocurrencies Financial Markets Authority, (March 2, 2020), https://www.fma.govt.nz/compliance/cryptocurrencies/
[3] Clair Evans, Deciphering New Zealand’s Approach to Regulating Digital Tokens, Lane Neave (Aug. 2018), https://www.laneneave.co.nz/cryptocurrencies-deciphering-new-zealands-approach-to-regulating-digital-tokens/.
