Regulations for Cryptocurrencies in New Zealand Expected to Take Effect in 2024
New Zealand: A Tech-Neutral Country with Cryptocurrency Regulations
New Zealand, known for its technology-neutral stance, has the New Zealand Financial Markets Authority (FMA) overseeing all financial activities in the country, including digital assets. The country has taken several steps to regulate the various aspects of financial services.
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In New Zealand, cryptocurrency is considered a form of property and is subject to income tax. However, there are no specific regulations dedicated solely to cryptocurrencies. In this module by Coinpedia, we will explore the cryptocurrency regulations in New Zealand in 2024.
Introduction
Although there is no specific legislation in place for cryptocurrencies, tax and contract laws are applicable to them. In 2018, the Inland Revenue Department (IRD) declared that cryptocurrency should be treated as property and taxed based on income tax rates. The primary legislation governing financial products, including cryptocurrency, is the Financial Markets Conduct Act 2013 (FMCA).
Is Crypto Legal in New Zealand?
Buying cryptocurrency is legal in New Zealand, and it is widely accepted in the financial sector due to the country’s technology-neutral legislation. However, it should be noted that cryptocurrency is not considered legal tender in New Zealand. The FMA regulates 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 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 AML regulations.
Crypto Acts in New Zealand
The Financial Markets Conduct Act 2013 (FMCA) governs financial products, including cryptocurrencies, which fall under categories such as debt security, equity security, and derivative or managed investment product.
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act 2009) provides clarity on compliance requirements for AML/CFT obligations. The Department of Internal Affairs supervises New Zealand’s virtual asset service providers, including crypto exchanges.
The Income Tax Act 2007 and Goods and Services Tax Act 1985, administered by the Inland Revenue Department, have been recently revised to explain 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 taxed include selling, trading, mining, and staking cryptocurrency, selling NFTs, earning crypto interests, and giving crypto gifts. The tax rates for crypto income range from 10.5% to 39% depending on annual income.
Source: Coinledger.io
New Zealand’s progressive tax system sets it apart from other countries. All crypto income is combined and taxed at one rate, regardless of profits from trading or selling crypto assets. Purchasing crypto assets is not taxable in New Zealand as the government only considers the income. The Inland Revenue Department closely monitors tax declarations, and violations can result in fines of up to 150% of the tax owed, up to $50,000.
Conclusion
Crypto culture is thriving in New Zealand, with the government actively regulating cryptocurrencies. The country’s progressive tax system ensures that the final tax amount depends on the individual’s income. New Zealand is considered a crypto-friendly nation as it continues to adapt to the evolving crypto landscape.