New Zealand’s Cryptocurrency Regulations Set to be Implemented in 2024
New Zealand, a technology-neutral nation, has a regulatory body called the Financial Markets Authority (FMA) that oversees all financial activities in the country, including digital assets. The country has consistently taken a balanced approach towards cryptocurrency and has implemented various measures to regulate the financial services sector.
Crypto is classified as property in New Zealand and is subject to income tax. However, there are no specific regulations dedicated solely to cryptocurrencies. In this article, we will explore the cryptocurrency regulations in New Zealand for the year 2024.
Introduction
While there is no specific legislation in place for cryptocurrencies, the existing tax and contract laws apply to them. In 2018, the Inland Revenue Department (IRD) declared that cryptocurrency should be treated as property and taxed accordingly. The primary legislation governing financial products, including cryptocurrency, is the Financial Markets Conduct Act 2013 (FMCA).
Legal Status of Crypto in New Zealand
Buying cryptocurrency is completely legal in New Zealand. However, it’s important to note that cryptocurrency is not considered legal tender in the country. The FMA regulates crypto 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.
To operate within the legal framework, these organizations must obtain licenses from the FMA, which require compliance with 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 implementing anti-money laundering regulations.
Crypto Acts in New Zealand
The Financial Markets Conduct Act of 2013 (FMCA) oversees 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) provides clear guidelines for compliance with anti-money laundering and counter-financing of terrorism obligations. The Department of Internal Affairs supervises New Zealand’s virtual asset service providers, including crypto exchanges, to ensure compliance with these obligations.
The Income Tax Act 2007 and Goods and Services Tax Act 1985, administered by the Inland Revenue Department, have been recently revised to outline the taxation of 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.
Taxation Policy
New Zealand does not have a capital gains tax. All crypto income is grouped together and taxed at the same rate. The activities that are subject to taxation in New Zealand include selling, trading, mining, and staking cryptocurrency, selling non-fungible tokens (NFTs), earning crypto interests, and giving crypto gifts.
The tax rates for crypto income range from 10.5% to 39% depending on the individual’s annual income. Unlike other countries, New Zealand’s tax system is progressive, meaning that different segments of income are taxed at progressively higher rates.
Purchasing crypto assets is not taxed in New Zealand as the government only considers the income generated. The Inland Revenue Department closely monitors all tax declarations, and violations can result in fines of up to 150% of the tax owed, up to a maximum of $50,000.
Conclusion
New Zealand embraces the growing crypto culture and maintains vigilant regulation of cryptocurrencies. The country’s progressive tax system ensures that the final tax amount is based on an individual’s income. As a crypto-friendly nation, New Zealand adapts to the evolving crypto landscape and strives to create a favorable environment for the industry’s development.