FOUR FAST FACTS ON: CRYPTO ASSETS JULY 2022
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What are crypto assets?
Crypto assets in New Zealand
Crypto assets are secured digital representations of value that use distributed ledger technology (usually blockchain). There are more than 12,000 crypto assets and multiple classes of tokens (with potentially different legal classifications), including:
The popularity of crypto assets in New Zealand has grown substantially, with estimates of 10-20% of New Zealanders utilising these assets as investments, including:
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intrinsic tokens (Bitcoin/Litecoin),
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privacy coins (Monero, Z-cash),
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alternative blockchain tokens (Solana, Polygon),
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non-fungible tokens (NFTs),
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asset backed tokens (Tokenised Securities, Pax-Gold), and
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stable coins (where the price is usually pegged to something (e.g. to US$1)).
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holding them directly through virtual wallets,
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holding them indirectly through a range of new investment products that allow investment via certain funds, including some KiwiSaver providers, and
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trading, collecting NFTs, playing blockchain based games, and earning yield through decentralized finance applications.
Regulatory considerations
Where to from here?
Crypto assets raise various potential regulatory implications, both in connection with the assets themselves, and also in relation to those who provide related products and services, including:
There are currently no laws specifically aimed at regulating providers of crypto assets or related products and services. However:
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how they are treated for tax purposes,
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whether they constitute a ‘financial product’ and are subject to the Financial Markets Conduct Act, and
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whether service providers constitute reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act).
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BANKING & FINANCE Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to its content.
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legislators are considering taxation aspects of crypto assets,
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the statutory review of the AML/CFT Act currently underway will likely result in changes in this area,
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the Reserve Bank of New Zealand is consulting on the future of money, with potential plans for a New Zealand issued Central Bank Digital Currency, and
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a Parliamentary inquiry was established in July 2021 to look into “the current and future nature, impact and risks of cryptocurrencies”.