Hi, This is Qadir A.K, Crypto lover, and Research Columnist.
As the series is advancing to explore new regions, I am very amazed at the response and support from my readers which always encourages me to provide the best reading experience in each series.
Welcome to the next chapter of my writing series ‘The Cryptocurrency Breakthrough 2020 – Synopsis 15’
Cryptocurrency Law in New Zealand
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.
Did You Know!!! Humans share only 5% of the population in New Zealand and about 47% of the country’s crypto owners reside in Auckland, capital of New Zealand.
I am sure, the below reading would give a clear picture of the cryptocurrencies in New Zealand.
New Zealand Government’s Friendly approach with Cryptocurrency
Payments in cryptocurrency is a reality in New Zealand and also has become a commonplace. New Zealand has emerged as a strong player in the blockchain innovation and crypto space, ruling out path-breaking announcements focusing on cryptocurrencies. This of-course made the people of the country more fascinated towards cryptocurrencies.
Callaghan Innovation, a state-backed innovation entity that helps in the growth of business in New Zealand, presented a report which showed immense support of the government towards cryptocurrency and blockchain technology.
Callaghan Innovation has also funded a cryptocurrency wallet and trading service ‘Vimba’ with $330,000.
Government’s Regulations on Cryptocurrencies
New Zealand has no specific regulations for cryptocurrencies, but instead, the existing laws are applicable. 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) is 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 licence from the FMA and be under its surveillance.
In the case of ICO’s, the following rules would apply,
- The ICO must comply with the Fair Dealings requirements under the Financial Markets Conduct Act 2013 (FMC Act) which prohibits form misleading or making any false comments.
- If the ICO is based in New Zealand, then it should get registered with Financial Service Providers Register (FSPR) by paying the applicable fees.
- Comply with Anti-money laundering obligations.
For detailed information on the regulations on the crypto assets kindly refer the DIA’s guidelines on Virtual Assets.
Laws on Cryptocurrency
New Zealand has a set of laws on the cryptocurrency service providers.
- The Financial Market Conducts Act 2013 (FMC Act)
Under the FMC Act, the exchanges, wallets, deposits, broking and ICO’s are considered as ‘Financial Services’ and the activities which involve crypto assets are termed as ‘financial products’ under FMC Act.
- The Anti-Money Laundering and Counter Financing of Terrorism Act 2013
To prevent the misuse of the crypto assets by the criminals to launder money and fund terrorist as they are vulnerable and allow greater levels of anonymity and they do have a global reach. Hence the cross border payments and trade needed to be monitored.
- The Financial Service Providers (Registration and Dispute resolution) Act 2008
The Act requires the service provided to get registered and also be a member of the dispute resolution scheme.
Taxation and Mining
Taxes on Cryptocurrency
The cryptocurrency in New Zealand is treated as property not ‘form of money’ as they are not issued by the government, which are subjected to taxes. The impact of this would be
- Income tax would be applied for normal sale or traded for another cryptocurrency.
- GST would be applied to the crypto transactions.
Income Tax On Cryptocurrencies
Like any other income from various sources is taxed, the profits gained from selling the cryptocurrencies will be taxed. The tax would be applicable even if you exchange within the cryptocurrencies, for eg, if you exchange Bitcoin with Ethereum, the difference between the values will be taxed.
The loss on the trade of the cryptocurrencies can also be claimed when you file your income tax return.
GST on Cryptocurrencies
Currently, the cryptocurrencies are liable for 15% GST on trading within the country as part of the business operations.
As a result, the cryptocurrencies are taxed two times on their activities, GST on the trade and later income tax on the profits. To solve this problem, the New Zealand Inland Revenue Department (IRD) has suggested wiping out the GST on the cryptocurrencies.
The government has also issued a TAX POLICY to the public.
The mining industry is considered as one of the best ways to earn cryptocurrency without entering the trading market. Cryptocurrency mining is a sizable industry in New Zealand with an approximate revenue of over $6 billion.
Did You Know!! The electricity consumed in the mining process is more than the electricity consumed by the whole country in total. However, electricity is generated by renewable sources.
The cryptocurrency earned after successful mining is subjected to GST of 15%. However, the IRD has planned to drop GST on some of the Crypto services, crypto mining is not included in the proposal and is entitled to the regular tax policy.
Series of Events
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 the 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 which 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 ICO’s and crypto-assets. The commentary answered all questions related to the regulations on ICO’s 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,”
New Zealand has a very positive approach to blockchain technology as well as for cryptocurrencies. 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. It would be very interesting to see, which all nations can adopt this model and also the possible new innovations within the country.