The Legislative Landscape for Cryptocurrencies in New Zealand Prior to 2024

In New Zealand, prior to 2024, the regulation of crypto-assets and related services fell under the purview of existing laws rather than specific cryptocurrency legislation. The primary regulatory bodies involved were the Financial Markets Authority (FMA), the Department of Internal Affairs (DIA), and the Inland Revenue Department (IRD), with additional involvement from the Reserve Bank of New Zealand (RBNZ) and the Commerce Commission depending on the nature of the assets or behavior​​.

Regulatory Framework

Financial Markets Conduct Act 2013 (FMC Act): This Act regulated fair dealing in financial markets and covered offers of financial products, governance, secondary markets, licensing of financial services, and financial reporting. The application to crypto-assets depended on whether they were classified as “financial products,” which include equity securities, debt securities, derivatives, and managed investment products. Notably, many crypto-assets did not fall under these categories. The FMA had the power to designate an investment product as a regulated financial product but had not used this power for crypto-assets as of the stated period​​.

Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act): This Act governed AML/CFT compliance for reporting entities. While it did not specifically refer to crypto-assets, guidance from the Financial Action Task Force (FATF) suggested that most virtual asset service providers (VASPs) would be covered. The DIA had supervisory responsibility for most VASPs, including exchanges and token issuers​​.

Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act): This Act required financial service providers, including those falling within the VASP definitions, to register and, if serving retail clients, join a dispute resolution scheme​​.

Taxation Laws: The Income Tax Act 2007 and Goods and Services Tax Act 1985, which were recently amended, provided additional clarity on the treatment of crypto-assets. Cryptocurrencies were considered a form of property and subject to income tax. New Zealand did not have a capital gains tax regime per se, so income from cryptocurrency was taxed like regular income​​​​.

Consumer Protection Laws: The Fair Trading Act 1986 and Consumer Guarantees Act 1993, which were general consumer protection laws, might apply to crypto assets, especially if they were not classified as financial products under the FMC Act​​.

Defining Crypto-Assets

The Income Tax Act and GST Act were the only laws to define “crypto-asset” for their purposes. The definition emphasized a digital representation of value, cryptographic security, decentralized ledgers, and fungibility​​.

Promotion and Legal Status

The promotion of crypto-assets was regulated under the FMC Act if they met the definition of financial products. For non-regulated offers, certain classes of investors had to self-certify as “eligible investors.” For crypto-assets not classified as financial products, promotion was governed by fair dealing rules under the FMC Act or the Fair Trading Act, prohibiting misleading or deceptive communications​​.

Buying cryptocurrency was legal in New Zealand, and the FMA regulated cryptocurrency-related organizations like brokers, exchanges, and ICOs. These organizations had to obtain appropriate licenses to operate legally under New Zealand laws​​.

International Context and Influence

New Zealand’s approach as a technology-neutral jurisdiction meant that its regulatory framework was not specific to cryptocurrency but rather applied existing laws to the sector. This stance ensured that all aspects of crypto technologies and services were appropriately regulated, aligning with the global trend of balancing technological innovation with responsible governance​​.

Conclusion

Before 2024, New Zealand’s legislative landscape for cryptocurrencies was characterized by the application of existing financial, anti-money laundering, and consumer protection laws to the sector. The country’s regulatory authorities managed these digital assets under the same principles and standards as traditional financial products and services, ensuring compliance, consumer protection, and transparency within the burgeoning field of cryptocurrency.