Cryptocurrency regulation

Cryptocurrency Regulations in New Zealand

Written by: Qadir AK

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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Apr 23, 2022

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Cryptocurrency in New Zealand has captured people’s attention where it’s hard to find one without having knowledge of crypto. Prior to the knowledge of crypto or Bitcoin in the country, people used to transfer value between them and rely on a face-to-face transfer through trusted third parties as a mediator.

whereas after the arrival of Cryptocurrency the transfer of value started happening in seconds without any third parties intervention they were eligible to transfer between any corner of the world, which no other conventional system can do further. 

Not just value can be transferred, but also it is cost-saving, and there is no need of reconciling the records twice. New Zealand is referred to as Heaven on the earth and so as with the cryptocurrencies too. Cryptocurrencies enjoy the most reputable status here in New Zealand with legal tenders and immense support from the government. Also, blockchain technology is also flourishing in the country.

New Zealand has an opportunity to become a blockchain and financial technology (fintech) hub, which fits the country’s nimble, agile and innovative perception. 

New Zealand Crypto Regulations 2022

13-04-2022:New Zealand Central Bank accelerates monetary tightening.

New Zealand and New Zealand’s central bank raised its benchmark interest rate by 50 basis points, accelerating the withdrawal of pandemic stimulus after inflation surged to a multi-decade high. which was the fourth-decade consecutive rate increase from the Reserve Bank of New Zealand after 25 basis point increments each october. 

11-04-2022: Unusual rate hikes aggressively while New Zealand’s housing market going backward

Sharon Zollner of ANZ says the Reserve Bank of New Zealand’s aggressive interest rate hike are coming within a short period of time, the country’s inflation accelerated in the first quarter of the fastest pace in 32 years, verifying the Central Bank’s decision of hike in interest rates by half a percentage point as it pursues an aggressive tightening cycle.

Government stance on Cryptocurrency

New Zealand to become and crypto or Blockchain hub certain changes are required from the government, they are : 

  • The government should allow crypto trading in the country as well as allowing them to be used as mode of payment for goods and services within and outside the country.
  • New Zealand based crypto exchnages must be entertained and the Internal affairs Department and Financial Markets Authority must provide the clear and detailed guidance to anti-money laundering/counter-the funding of terrorism (AML/CFT).
  • Along with the great advice of the FMA, DIA must provide the protection for consumers of cryptocurrencies.
  • Crypto exchnages that comply with AML/CFT and other requirements must have access to New Zealand’s bank accounts.
  • GST is removed from the crypto payments used for the payment of goods and services.
  • The Inland Revenue Department(IRD) clarifies the other taxation rules for the use of cryptocurrencies.

There is an ongoing debate on cryptocurrency rising with increased attention in the country. It has boxed with an argument to whether to efficiently regulate cryptocurrency or not in the country, which has involved diverging opinions, with some beileving te necessity of a safeguard for people’s investments and some beileving it to become a central theme of 2022, where to some think that country must have to implement the regulatory act on crypto market to run without any intervisions.

New Zealand being one of the most friendly countries for virtual currencies but not regulated with major regulatory reforms yet.  The Inland Revenue Department (IRD), the public service department of New Zealand considers the cryptocurrencies as ‘Property’. The gains on these properties are taxable and losses can be claimed.

The Cryptocurrency and the service providers are bound to comply with the AMF-CTF regulations of the country. The Department of Internal Affairs (DIA) and Financial /Markets Authority(FMA) are New Zealand’s supervisory agencies for money transfer under AML-CTF rule. The exchanges which wish to offer cryptocurrency trading on their platform, need to obtain a license from the FMA and be under its surveillance.

Taxes on Cryptocurrency

Cryptocurrency in New Zealand is not considered money by the Inland Revenue Department, instead, crypto is viewed as property for the purpose of tax. There are no specific tax rules for crypto in New Zealand, but new legislation is currently ahead to clarify the GST treatment for crypto assets along with some timing issues.

Even though New Zealand does not have any comprehensive capital gains tax (CGT), it is mandatory to know that any profits and losses made on crypto will be generally taxable.

Crypto exchanges share crypto transaction details of an individual to the IRD department in a response to its request, which helps IRD to identify the investors for tax purposes and crypto-assets assessed as part of their personal income.

The buy and sell of Crypto assets also fall under taxation of IRD, a loss can be claimed further. Any crypto income earned from assets mined or sold outside the country is not subjected to New Zealand’s tax for non-residents. Residents of New Zealand are taxed for buying, selling, and mining crypto assets in the country.

Cryptocurrency Mining

Mining in New Zealand of Bitcoin, Ethereum, and other cryptocurrencies is possible and is considered a profit-making scheme or business activity, which also will be counted in tax returns. profits and losses from cryptocurrency mining are considered assessable or deductible income in the country. 

mining can be achieved by running specialized software on a computer or by investing in specialized mining equipment. The electricity price is quite high in NZ, as miners face different problems in other countries here in New Zealand the miners face very high electricity costs which miners must have to adapt to run efficient machines and mine the most profitable coins to maximize the profit.  

There are different types of mining involved in New Zealand, Solo mining as the name says is owned by one and is considered expensive, but will result in giving a special prize for one’s effort. And the other form of mining is Pool mining is similar to a collective that contributes to the mining process, where you can participate with your limited processing power and are compensated based on the hash rate.

pool mining requires very less hardware and electricity compared to individual participants. Cloud mining is another form of mining where purchasing of hashing power from machines is not owned by you. payouts happen on a daily or monthly basis and are required to be signed up by some programs. 

Historical Events & Announcements

10-04-2020:- The Financial Markets Authority issued warnings against investing in a crypto platform, Profit Bitcoin which claimed to become millionaires in just two months with the prime minister’s photo attached in the advertisement.

12-06-2019:- New Zealand became the first country to pay salaries and wages in the form of cryptocurrencies. The tax also would be applied to them.

07-06-2018:- Reserve Bank of New Zealand issued a document that noted the Pros and Cons of issuing a central bank digital currency. 

25-10-2017:- New Zealand’s Financial Markets Authority (FMA) published a commentary on ICOs and crypto-assets. The commentary answered all questions related to the regulations on ICOs and cryptocurrencies, tax policy and also the laws implemented on them. The detailed commentary can be accessed HERE.

11-12-2013:-  The Deputy Governor of Reserve Bank of New Zealand, John McDermott, warned about the bitcoins. He urged all the country’s banks to caution their customers on virtual currency. He said,

You have to worry about where the supply is, how it’s controlled, how it’s monitored. Who knows at this point? There is still a lot for the world to learn on this issue,”

Conclusion

New Zealand has a very positive approach to blockchain technology as well as for cryptocurrencies. Crypto in New Zealand has seen a meteoric rise in usage in recent times as people are excited to invest in new digital assets. Many startups and well-settled companies are performing research and projects on blockchain technology with innovative business plans.

After all, we can say, cryptocurrencies have found a better place in New Zealand, where-in they are permitted to be paid in the form of salaries or wages. Authorities in NZ are working on strengthening their rules and regulatory norms over cryptocurrency usage and trading in the country.

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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