A central bank-issued cryptocurrency, thriving cryptocurrency exchanges and the ability for businesses to trade in GST-free cryptocurrency are needed if Aotearoa New Zealand is to enjoy the vast potential benefits from this technology, a new report finds.
Based on research funded by the Law Foundation’s Information Law and Policy Project, a team of legal and banking experts has recommended a regulatory framework for blockchain. Their report recommends that the Government actively support New Zealand becoming a blockchain and financial technology (fintech) hub.
“Cryptocurrencies are here to stay,” says principal researcher Alex Sims, Associate Professor of Commercial Law at the University of Auckland Business School. “But New Zealand has fallen behind countries we like to compare ourselves with, including Australia, the United Kingdom and Japan. So now we need to live up to our reputation as nimble, agile and innovative and rapidly follow the lead of those other countries. That’s the only way we can maximise the opportunities that blockchain offers.”
The authors argue that fast-moving technological advances and sensible regulation will address most concerns commonly raised about all types of currencies, including security, fluctuations in value, and potential for criminal abuse such as money laundering and financing terrorism.
Because the blockchain that underlies cryptocurrencies is a shared tamper-proof ledger of transactions, it removes the need both for buyer and seller to reconcile their records and for intermediaries to coordinate transactions.
Associate Professor Sims says “While not all blockchain applications require the use of cryptocurrencies, blockchain will not reach its full potential if cryptocurrencies are unable to be used, or their use made unnecessarily difficult. The New Zealand Government has taken a hands-off approach to cryptocurrencies, when it should be actively fostering an ecosystem so that New Zealand is seen as an attractive country in which to base blockchain businesses.”
The report makes a number of recommendations on regulating cryptocurrencies in New Zealand.
Report: Regulating Cryptocurrencies in New Zealand – pdf 179 pages