New Zealand Introduces Cryptocurrency Regulations in 2024
New Zealand: A Tech-Neutral Country with Progressive Crypto Regulations
New Zealand, known for its technology-neutral approach, has the New Zealand Financial Markets Authority (FMA) overseeing all financial activities in the country, including digital assets. The country has taken significant steps to regulate the various aspects of financial services within its borders.
Cryptocurrency is classified as property in New Zealand and is subject to income tax. While there are no specific regulations dedicated solely to cryptocurrencies, they are governed by tax and contract laws. In 2018, the Inland Revenue Department (IRD) declared that cryptocurrencies should be treated as property and taxed accordingly. The Financial Markets Conduct Act 2013 (FMCA) is the primary legislation governing financial products, including cryptocurrencies.
It is legal to buy cryptocurrency in New Zealand; however, it is not considered legal tender in the country yet. The FMA regulates cryptocurrency organizations to ensure consumer protection. This includes cryptocurrency brokers and exchanges, crypto wallet providers, blockchain-based businesses with initial coin offerings (ICOs), and blockchain projects offering investment options. These organizations must obtain licenses from the FMA, allowing them to operate under laws such as the Anti-Money Laundering and Countering Financing of Terrorism Act 2013, the Financial Markets Conduct Act 2013, the Financial Advisors Act (for ICOs), and the Financial Service Providers Act 2008. The Department of Internal Affairs is responsible for enforcing anti-money laundering regulations.
The Financial Markets Conduct Act of 2013 (FMCA) governs financial products, including cryptocurrencies, that fall under categories such as debt security, equity security, and derivative or managed investment products. The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) clarifies the requirements for compliance with anti-money laundering and counter-terrorism financing obligations. The Department of Internal Affairs supervises New Zealand’s virtual asset service providers, including crypto exchanges, under this act. The Income Tax Act 2007 and Goods and Services Tax Act 1985, administered by the Inland Revenue Department, were recently revised to provide guidance on taxing crypto assets. The Fair Trading Act 1986 and Consumer Guarantees Act 1993, governed by the Commerce Commission, protect consumers in general and apply to crypto assets if they are considered financial products.
New Zealand has a unique taxation policy for cryptocurrencies. It does not have a capital gains tax, and all crypto income is grouped together and taxed at the same rate. Taxable activities in New Zealand include selling, trading, mining, staking cryptocurrencies, selling NFTs, earning crypto interests, and giving crypto gifts. The tax rates range from 10.5% to 39% depending on the individual’s annual income.
New Zealand’s progressive tax system sets it apart from other countries. Instead of a flat tax rate on the entire income, individuals pay progressively higher taxes on different income segments. Purchasing crypto assets is not taxable in New Zealand; only the income derived from them is subject to taxation. The Inland Revenue Department closely monitors all tax declarations, and violations can result in fines of up to 150% of the owed amount, with a maximum penalty of $50,000.
New Zealand is known for its crypto-friendly environment and continually adapts to the evolving crypto landscape. The government maintains a proactive approach to regulate cryptocurrencies while fostering innovation and growth in the sector.