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New Zealand Cryptocurrency and Initial Coin Offering (ICO)
Cryptocurrency and Initial Coin
Cryptocurrencies are digital tokens available online via exchanges, initial coin offers (ICOs) and token events. If your business is based in New Zealand and you provide a ‘financial service’ related to cryptocurrencies, you need to comply with the Financial Service Providers (Registration and Dispute Resolution) Act 2008. Key activities considered ‘financial services’ include exchanges, wallets, deposits, and broking.
New Zealand’s Finance Regulator (FMA)
New Guidance on Cryptocurrencies and
Initial Coin Offering (ICO)
In its view, any cryptocurrency or ICO-derived tokens or cryptocurrencies are securities under the Financial Markets Conduct Act 2013 - even those that are not financial products; a security is any arrangement or facility that has, or is intended to have, the effect of a person making an investment or managing a financial risk.
Tokens could fall into one of four financial product categories - debt securities, equity securities, managed investment products or derivatives - depending on their characteristics. The FMA left the door open to additional classification for such offerings, through which the technology can be used to bootstrap a blockchain network through the sale and release of tokens.
Exchanges issuing their own cryptocurrency to facilitate trading fall within the financial service category of ‘issuing and managing means of payment’.
Exchanges allowing cryptocurrency trading fall within the financial service category of ‘operating a value transfer service’.
If you allow trading of cryptocurrencies or tokens that are financial products under the Financial Markets Conduct Act 2013 (FMC Act) you need to consider whether you are operating a financial product market.
If you’re a wallet provider storing cryptocurrency or money on behalf of others, and you facilitate exchanges between cryptocurrencies or between money and cryptocurrencies, your services fall within the category of ‘operating a value transfer service’.
If you hold money for depositors, you may be offering debt securities. However, if depositor funds are held in trust, your wallets may not be debt securities. Debt securities are financial products. They have additional regulatory requirements under the FMC Act.
If you arrange cryptocurrency transactions, you are providing the financial service of ‘operating a value transfer service’. If you provide transaction services in relation to cryptocurrencies or tokens that are financial products you may have obligations as a broker under the Financial Advisers Act 2008.
Registration and Other Obligations
If you provide a financial service, you must:
- be a member of a dispute resolution scheme if the financial services are provided to retail clients;
- be registered on the Financial Service Providers Register (FSPR) for each category of financial service you provide;
- pay the applicable fees and levies for the relevant categories of financial service you provide;
- comply with the fair dealing provisions in Part 2 of the FMC Act. These prohibit misleading conduct and deceptive statements being made in relation to financial services;
- comply with anti-money laundering obligations.
Expected Time to Complete Your FSP Application
The current process appears to take about I ½ to 2 weeks to incorporate a company, obtain a NZ Bank account and necessary/eventual changes on the shareholder and directorship structure.
A Business Plan has to be written and edited, CVs to be vetted, a NZ office and a part time manager appointed before formally applying online with FSPR. Dependent upon TBA’s input, it can take another 4 to 6 weeks for this process to be completed.
FSPR tends to take another 4 to 5 weeks, considering all questions they may and usually place before handing over the application to FMA.
FMA’s official position is that their enquiries will take up to 60 working days (i.e., 12 weeks) before we get a definite answer.
Total Expected Timing to get this whole process completed – 25 weeks.
Therefore 5 to 6 months for you to consider getting your own project licensed, that will be a reasonable timing.
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Discuss with us in person, all the other issues likely to arise during and post FSP Registration, such as employing a full-time or part-time experienced manager, who will run the operation from their NZ office, business plans, etc.re Information!
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