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New Zealand, known for its progressive stance on technology and finance, owns a unique taxation scheme for cryptocurrencies. In contrast to outright bans seen in some jurisdictions, New Zealand embraces the use of cryptocurrencies, albeit with a structured taxation system in place. Users engaging in various activities such as buying, selling, mining, and receiving interest on cryptocurrencies are subject to taxation. Importantly, the taxation is based on the individual’s income, providing a flexible approach that considers the volatile nature of the crypto market. However, users must diligently report their earnings, as failure to comply may result in penalties and fines from the authorities.
Perspectives on Stablecoins
Governor Adrian Orr of the Reserve Bank of New Zealand has offered candid views on stablecoins, questioning their stability and suitability as alternatives to fiat currency. Orr emphasizes the importance of credible institutions, like central banks, in maintaining stable currencies. He labels stablecoins as speculative assets and calls for regulatory scrutiny, echoing concerns raised internationally regarding their reliability and adherence to regulatory standards.
Amidst evolving technologies and global regulatory discussions, New Zealand faces the challenge of striking a balance between innovation and oversight. While the government explores the potential of central bank digital currency (CBDC) and weighs regulatory options, it remains cautious about premature interventions. Recommendations from legislative studies advocate for coherent guidance and deliberate approaches to regulation, highlighting the complexity of navigating the cryptocurrency landscape.
Overall Crypto Regulation in New Zealand
New Zealand’s approach to regulating cryptocurrency is, however, much more broader. Their regulatory approach is founded on its status as a technology-neutral jurisdiction. This means laws are not specifically designed for cryptocurrencies but are applicable to all financial technologies requiring regulation. The Financial Markets Authority (FMA) oversees financial activities, including cryptocurrencies, ensuring a balanced regulatory environment.
In New Zealand, cryptocurrencies are treated as property for tax purposes. This classification means that profits from disposing of cryptocurrencies are taxable events. The Inland Revenue Department (IRD) has clarified that from 2018, cryptocurrencies would be subject to income tax, aligning with international practices. The taxation system is progressive, with rates varying based on the individual’s income.
The FMCA is the primary legislative framework governing financial products, including cryptocurrencies, in New Zealand. It mandates compliance with obligations related to fair dealing, governance, and disclosure. Cryptocurrencies are covered under this act if they are offered within the country and meet certain criteria outlined by the FMCA.
Additionally, New Zealanders are actively participating in cryptocurrency investments, and the government is responding by exploring regulatory frameworks. While the Reserve Bank of New Zealand (RBNZ) acknowledges the significant risks and opportunities presented by crypto assets, it refrains from advocating for immediate regulatory action. Instead, it emphasizes the need for vigilance and prudence, recognizing the uncertainties surrounding the sector’s development.
Ian Woolford, the Director of Money and Cash at RBNZ, noted that the challenges posed by crypto assets and other technological advances don’t align precisely with the jurisdiction of any single agency. He mentioned that concerns such as safeguarding consumers and investors or the potential business or regulatory hurdles to market entry are significant. After initiating a dialogue in December 2022, which garnered feedback from 50 different entities, the nation’s central bank concluded its stance. This consultation was part of a discourse on an Issues Paper on Private Innovation, addressing the expansion of the digital currency asset market and sought input on it.
Anti-Money Laundering and Consumer Protection
New Zealand enforces the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009, with three AML/CFT supervisors overseeing compliance. The Fair Trading Act 1986 and Consumer Guarantees Act 1993 provide additional consumer protection, potentially covering crypto assets depending on their classification.
Additionally, New Zealand offers a regulatory environment that is both inclusive and protective of consumers in the cryptocurrency space. By treating digital currencies as property and ensuring compliance with existing financial and consumer protection laws, New Zealand aims to foster innovation while safeguarding against fraud and financial crimes.
Buying and Mining Cryptocurrency
Buying cryptocurrency is legal in New Zealand, with the FMA regulating cryptocurrency-related organizations under various acts. However, cryptocurrencies are not considered legal tender. Mining is also legal, though it is subject to income tax, with miners able to claim deductions for expenses incurred during mining activities.
The process of buying cryptocurrencies in New Zealand involves selecting a reputable online exchange or trading platform, registering an account, verifying identity, selecting a payment method, and finally, purchasing the desired cryptocurrency. This process underscores the country’s open yet regulated approach to digital currencies.
Nearly a quarter of a year following the halt of Revolut digital currency exchange services in the United States, the electronic banking entity Revolut initiated the same service in New Zealand almost two months back.
Gambling
While traditional brick-and-mortar casinos are legal and regulated in New Zealand, the landscape shifts when it comes to online gambling. Domestic online casinos are prohibited, leading players to offshore platforms. These platforms commonly accept cryptocurrencies for deposits and withdrawals, offering players anonymity and efficiency in transactions. Despite winnings from online casinos being exempt from taxation, users must still adhere to cryptocurrency taxation laws, underscoring the importance of understanding the tax implications of their actions.