Financial Crime World

Cryptocurrency and Financial Crime in New Zealand: A Regulatory Landscape

New Zealand’s cryptocurrency landscape is characterized by a lack of specific legislation regulating digital currencies. However, contract and tax laws do apply to cryptocurrency transactions. For instance:

Taxation of Cryptocurrencies

  • The Inland Revenue Department (IRD) treats cryptocurrencies as property for tax purposes.
  • Gains from selling cryptocurrency are subject to taxation.

Regulation of Cryptocurrency Businesses

Despite no legal tender status, cryptocurrency exchanges, brokers, wallet providers, and businesses offering Initial Coin Offerings (ICOs) and investment opportunities are regulated by New Zealand’s Financial Markets Authority (FMA). These entities must:

  • Obtain a license from the FMA.
  • Comply with various laws, including:
    • The Financial Markets Conduct Act 2013.
    • Anti-Money Laundering and Countering Financing of Terrorism Act 2013.
    • The Financial Service Providers Act 2008.

Registration and Compliance Requirements

Cryptocurrency businesses operating in New Zealand are required to:

  • Register with the Financial Service Providers Register.
  • Comply with anti-money laundering (AML) and fair dealing requirements.
  • Oversee AML obligations, which is managed by the Department of Internal Affairs.
  • Comply with the Financial Advisors Act.

Regulation of Initial Coin Offerings (ICOs)

ICOs are analyzed on a case-by-case basis to determine the applicable regulatory framework. The token will be classified as involving:

  • A debt security.
  • An equity security.
  • A managed investment product or derivative under the Financial Markets Conduct Act 2013.

Key Considerations for Regulating Cryptocurrencies

New Zealand’s approach to regulating cryptocurrencies is based on four key considerations:

  • Whether the crypto asset is a financial product/security token.
  • If the business provides a financial service.
  • The sophistication of the purchaser.
  • Whether the investor is based in New Zealand or overseas.

Legality of Cryptocurrency Mining in New Zealand

The legality of cryptocurrency mining in New Zealand remains unclear. However, businesses providing financial services related to cryptocurrencies are regulated by the FMA.

Regulatory Uncertainty Surrounding Cryptocurrencies

The regulatory uncertainty surrounding cryptocurrencies is not unique to New Zealand, as most jurisdictions have yet to enact laws governing digital currencies.