Initial coin offerings
The FMA wrote,
“The extent to which an ICO is regulated depends on whether a ‘financial product’allows to the retail investors in New Zealand.”
Four types of financial product are listed under the Financial Markets Conduct Act 2013 (FMC Act):
- Debt securities
- Equity securities
- Managed investment products and
Furthermore, the FMA explains the detail of each product. What’s significant, it has been clear that all tokens considering securities.
The FMA also declared that:
“All tokens or cryptocurrencies are securities under the FMC Act- even those that are not financial products. Since, a security is any arrangement or facility that has the effect of a person making an investment or managing a financial risk.”
Cryptocurrencies and token must act according to the fair trading Act 1986. Since, these are not the financial product and services in the trade.
The guidance also underlines that crowdfunding in the form of an ICO is not the same as crowdfunding conducted by the FMC Act.
The FMA generates licenses to the crowdfunding platforms to build the intermediary service such as website so that companies can create offers to retail investors.
New Zealand-based businesses provides the financial services such as exchanges, wallets, deposits, brokerage must comply with the Financial Service provider (Registration and dispute resolution) Act 2008.
New Zealand-based ICO or cryptocurrency issuers and Financial Service providers must match the following registration requirements and commitments:
- If the financial services offer to the retail clients then you should be the member of dispute resolution scheme.
- Must register on the Financial Service Provider Register (FSPR) for every financial service category delivered.
- Must follow with fair dealing provisions of the Financial Markets Conduct Act
- Comply with anti-money laundering commitments
- Pay the applicable fees as well as leaves for the applicable categories of financial service you deliver
Along with the guidance, the FMA alerts users on the state of uncertainty regarding cryptocurrency investment:
- Value of the Cryptocurrency can change rapidly.
- You may lose your coins.
- Cryptocurrencies are not accepted widely.
In order to minimize the risk, the FMA influences investors to ensure that any exchange they use it must:
- Located in New Zealand
- A affiliate of a dispute resolution scheme and
- Contains your New Zealand Dollars in a trust account.