The Reserve Bank says it's not proposing regulation yet, but is increasing its monitoring of stablecoins and cryptoassets (cryptocurrencies), and suggests there could be "real advantages to harmonising cryptoasset regulation" globally.
The comments come as the central bank releases a response to consultation in its ongoing future of money project. It sought feedback on its approach to the opportunities and challenges from new forms of private money such as cryptoassets, including stablecoins.
"The submissions reinforced our view that there are significant risks and opportunities, but also significant uncertainties about how the sector will develop and where the optimal balance will lie. We agree with the view that caution is needed. This is why we are not proposing a regulatory response at this point," the RBNZ says.
"Another reason for taking a cautious approach lies in regulatory developments globally. There is likely to be real advantages to harmonising cryptoasset regulation. As various overseas regimes are implemented, best practice for regulating cryptoassets may become clearer. This will inform our optimal regulatory design and the assessment of any need for alignment."
"More immediately, we intend to strengthen our monitoring capability in a more systemic, robust, way. Currently our data is limited and varies in quality, which limits our ability to assess potential issues and then respond in a timely and effective manner," the Reserve Bank says.
"Monitoring global regulatory developments, particularly in similar jurisdictions and with key global organisations such as the Bank for International Settlements, will be an integral part of the monitoring framework. We need to take a cross-agency approach to monitoring as well as future regulation. The Reserve Bank is already working with other CoFR [Council of Financial Regulators] agencies to identify gaps in data and metrics. Building on this work we propose a staged process to enhance our capability."
The Reserve Bank says issues raised by cryptoassets and other innovations don't fall neatly within the existing agency boundaries.
"Issues such as consumer and investor protection, or perceived regulatory barriers to entry, can have an impact on the collective vision we have for a reliable and efficient money and payment system that better meet New Zealanders’ evolving needs. These issues matter also because how we respond now could shape how they evolve from their current use, for example, to become new forms of money," the Reserve Bank says.
Friday's update from the Reserve Bank comes after it said in December it was establishing a "monitoring framework" to watch and assess developments in new forms of 'private money', including cryptoassets. The Reserve Bank is doing extensive work as part of its Future of Money programme. This includes work on the potential development of a central bank digital currency (CBDC), which is still continuing.
A CBDC is the digital form of a country’s fiat currency. That means a Reserve Bank issued CBDC, like the physical NZ dollar, would be a liability of the Reserve Bank, backed essentially by trust in the Government and its institutions. By law the Reserve Bank is the sole supplier of NZ banknotes and coins, with this being a key raison d'être for the central bank.
Parliament's Finance and Expenditure Select Committee undertook an inquiry into cryptocurrencies during 2021. It pledged to report back to the House but is yet to do so.
In its submission to the Select Committee, the Financial Markets Authority (FMA), which regulates NZ’s financial markets, pointed out it doesn't regulate cryptocurrencies. However, some cryptocurrency activities can fall within the FMA's regulatory remit.
The RBNZ's definitions of cryptoassets and stablecoins are below.
What are cryptoassets?
A cryptoasset is a digital token that relies on cryptographic methods and non-traditional payment infrastructure to be transacted and stored.
What are stablecoins?
A stablecoin is a type of cryptoasset that aims to stabilise its value relative to other conventional assets, including central bank money.
37 Comments
Transferring airline miles points back into cash is significantly hampered if not made more impossible as you have already put more money in to pay to get airline miles points above the cost of travel so that any reward returned is already less money than that you have already paid. The points are non transferable to cash and never will be able to be easily traded between people. If they simply offered more competitive pricing with less profit added then it would be far better for consumers then getting some cheap tat or discount they would already offer or indeed another flight you would have had the money for if you did not pay higher costs for earlier tickets with airline points.
Airline & reward points schemes and company scrip are not a currency, they do not have any of the key functions that are required for them to even come close to being considered a currency. Pretending they are is fraudulent and misleading on purpose. Protip company scrip is illegal in civilized countries with fair pay and labour laws for a reason. Perhaps you should go look that up.
Digital assets are not currencies. Bitcoin is a commodity money. The rest are unregistered securities.
You can't stop someone creating a digital asset because it is simply mathematics and code.
Actually, while I understand what you are saying, this is not correct.
As to whether or not BTC and crypto are commodities and / or securities is contestable by each jurisdiction ( for ex, in the U.S).
ETH and XRP are not securities in Japan. And BTC is not a commodity.
You can't pay tax in it, no. That's why we have a fiat currency, and what gives it its value, when you think about it. The only reason a small piece of brass or a polymer rectangle is treated as money is because we all have to pay tax in that currency (and if you don't, you would ultimately be punished).
But sure you can be paid in it if you want to be, who's to stop you being paid in any commodity or currency? I've worked for USD for international clients, and I've paid friends and family in beer and pizza. Note, an employee is obviously a different kettle of fish as opposed to a contractor or other less formalised arrangement, but the basic principle stands.
Whether you can pay someone in some currency or commodity is up the recipient, not you.
Depends. If BTC is not legal tender, then there is no obligation to accept it. That doesn't mean it is 'illegal' to accept it. Depends on the jurisdiction. Case in point: Japan.
In some jurisdictions, it is possible to pay taxes in Bitcoin.
Here's a proposal for increasing financial stability using Ethereum:
If each of the banks issued their own version of a stablecoin (i.e. anzNZD, bnzNZD, asbNZD, and so forth), those stablecoins could be indexed on register.app (The Reserve Protocol). The end result is an NZD that isn't wiped out entirely if any one bank fails.
Furthermore, if banks created a yield generating version of this stablecoin, or the market naturally produces a tokenised version of this yield generating dollar from borrowing and lending, the same diversified NZD could be created with yield going to insurers of that index. Basically producing the first insured form of NZD deposit insurance that isn't dependent on government response/a bailout via debt or debasement.
Just some food for thought, since I know many people preach writing off the industry while not actually involving themselves in its weeds.
I said in my original comment. Within the current system most people hold their funds in one bank. If that bank fails, customer funds are used to bail-in that bank (no deposit insurance).
If each bank issued its own stablecoin, you could then create an index/basket version of the dollar (using open-source protocols within DeFi) that isn't entirely dependent on any one issuer.
For example, rather than having all your dollars with ANZ, you could hold a dollar that was 1/5 ANZ, 1/5 BNZ, 1/5 ASB, 1/5 Westpac, 1/5 Kiwibank. The benefit is that it is a less risky expression of the dollar for end users.
There is also the programmable insurance part of the equation too, where if there is a tokenised dollar that generates a return, this return could be used to pay insurers. So that, in the event of any one bank collapsing, insurers step in to cover the hole and make up the difference for end users. Again, a more robust version of a digital dollar than we're currently used to, that's capable of self-healing overnight where our institutions would take considerable time to respond.
The longer-term, broader implication of such a protocol is you could even compose a novel currency that tracks and is backed by tokenised assets of the CPI, so people have access to an asset-backed currency that doesn't devalue over time.
The longer-term, broader implication of such a protocol is you could even compose a novel currency that tracks and is backed by tokenised assets of the CPI, so people have access to an asset-backed currency that doesn't devalue over time.
Sorry? What does this "tokenised assets of the CPI" mean? The CPI is a measure of the price level of goods and services.
The CPI has a relationship with the money supply. For a digital representation of fiat to maintain purchasing power, it needs properties. You cannot 'decree' that the CPI has increased by 3%, therefore we adjust the bank token so purchasing power increases accordingly.
"You cannot 'decree' that the CPI has increased by 3%, therefore we adjust the bank token so purchasing power increases accordingly."
Isn't that exactly what Bitcoin sets out to do by design? Ramping up the cost of new coins, to try and make all the existing coins hoarded already worth more?
Sure, bad wording. It'd be more like general purchasing power.
I meant that as more and more Real World Assets are brought on chain, you can compose multi-asset currencies (that are redeemable for their underlying components). These would retain purchasing power better than a fiat non-asset backed currency, and be of particular use to people around the world who don't own assets.
I meant that as more and more Real World Assets are brought on chain, you can compose multi-asset currencies (that are redeemable for their underlying components).
You mean like the tokenization of assets such as gold or other commodities? Coincidentally, two gold-backed tokens (incl Perth Mint Gold Token) are being discontinued. I think it's lack of demand.
Precisely, except imagine a higher order token that's 1/4 tokenised gold, 1/4 stablecoins, 1/4 tokenised bonds and 1/4 tokenised stocks. It's like the synthesis of one's investment portfolio with their Medium of Exchange. Peter Thiel talked about this concept in the early 2000s.
As you've kind of eluded too though, I think much of the problem IS the lack of regulatory clarity, this assumption that all crypto-assets are memetic or ponzinomic in nature, when really these properties are only relevant to the security model of the base network. If we could get to a place where becoming an onchain issuer for an asset or assets was an encouraged venture, there're all kinds of novel financial products we can come up with here. The space would also mature and begin to look like a more transparent and stabler version of the current system.
A supportive regulatory framework for Bitcoin, as a commodity, in NZ would be great for the country. I agree that a consistent approach globally would be ideal, and I see no reason why we can’t take the initiative to be a leader in this space.
One good reason is that the govt and RBNZ are miles behind the 8 ball.
The RBNZ and govt are in snooze mode. And here's an illustration why.
This month Japan’s National Tax Agency has updated its corporate tax regulations, bringing clarity to the treatment of cryptocurrencies. Under the new rules, unrealized gains from crypto assets issued by companies will no longer be subject to the current 30% corporate tax.
This is great for the Web3 industry but also enables other companies to hold cryptocurrencies on their balance sheets without onerous tax burdens.
Interesting to see this after the UK has just today passed an Act to regulate crypto-assets. Following up on a manual for the usage and taxation of crypto-assets released last month.
https://www.gov.uk/government/news/rocket-boost-for-uk-economy-as-finan…
The e-CNY is already here and other countries will follow soon, including maybe NZ
https://en.m.wikipedia.org/wiki/Digital_renminbi
Except over 90% of crypto is fraud and scams. The largest exchanges have been proven to be poorly run fraud schemes that literally take investors money and launder it. There is no deposit guarantee, no trusts holding investor funds, no refunds, no possible police interventions possible in cases of theft. The people threatened the most by cryptocurrencies are the consumers of cryptocurrencies. Just look at what happened to NZ largest exchange and the well known ponzis that dominate the market in NZ. If anything you might say the RBNZ is thumbing their nose at crypto by saying it will never amount to much to require the barest minimum in consumer & investor protections and exchange regulations. Any crypto fan would want those things for it to become more legitimate and mainstream.
Having been a software engineer involved with crypto introduction in NZ and with family now still working in the business it is very hard to justify its use now for anything other than speculation by trading within the going pump and dump schemes and market manipulation. It does not take a genius to realize when someone like Eion advertises that Telsa will buy and use bitcoin it is a good time to sell some and so later when he reveals the pipe dream was literally from his pipe use and his desire to financially benefit from the gullible you will have made a tidy sum and can continue speculating and trading. Likewise the NFT market has severe faults lacking basic consumer protections which makes the market rife for fraud and scams. Unfortunately NZ pays our art and culture grants to "creatives" to literally set up NFT and crypto "platforms" (aka cheap fraudulent websites) that do nothing more than take money and assets from actual creatives and then leaves them high and dry. Sadly the NZ government is equally susceptible to crypto fraud schemes so long as you can put a cultural and artistic spin on their operation.
Sadly it is true physical storage in multipart keys is safer than any exchange. However there is a difficulty in accessing funds should disaster or medical accident occur (which also would affect any digital storage too), e.g. where there is no avenue to access funds if you suffer a brain injury after a sports accident, or a landslip, or a fire at the exchange server data center, or most common a simple power outage which only happens over hundreds of times a year. The risk is significantly affected by storage location and physical or digital access. There is no legal avenue to access funds without the keys and if the funds are transferred to a thief then they are gone. Which is why exchanges are more susceptible because they involve more people with less secure sites and more attack risk. Hence the need to involve multiple locations and secure backups that cannot be decoded by others (in your storage location) but should you be significantly impaired then having family or someone you trust able to aid you in accessing your funds again (but vital no family member or trusted person can decode the key either by themselves as you can never fully trust them either).
Unfortunately some people, especially those with less understanding of the technology are easily fooled by selling points of guaranteed returns... Why more of the scammer market advertise it these days as most people have no legal avenue to recover funds unless significant worldwide investigations are undertaken. With NZ police response to theft or financial scams it is no surprise financial crimes in cryptocurrency/ digital assets are the back edge of the back seat. Less people are involved in actual cyptocurrency trading now than before but it is more because other investment options are easier to access, more secure and the cost of living has risen so even those who would be fooled by guaranteed returns statements just don't have the money to "invest". Sadly that means they also don't have enough money for good food, medical costs, basic transport, essential bills, insurance. Meanwhile the technical followers of the technology enter into the market knowing the severe faults but are willing to take on high risk, often with our propensity for optimism bias, survivorship bias and gambler's fallacy. More regulation and protections would be great for the businesses and tech as the severe lack only increases the harm and reduces the availability of the technology for different use cases.
What you have to do, is write out the code for your crypto using invisible ink on a piece of paper. Then bury it 20 meters underground in a lock box that's boobytrapped using a claymore mine. 98% secure.
That's such a normie thing to say. There are no "codes" for digital assets. You might be referring to recovery phrases for cold and hot storage.
Yet still much smaller than the NZ largest exchange which went bust after a severe theft of funds from global customers. It is so easy to compare via the customer numbers, active trades, or value of funds held so if you are this easy to fool with cheap marketing perhaps you should stick to services with easy in the name. Maybe you can save some of that fanboyism to actually push for basic consumer and investor protections. You know those to protect consumers and investors (not the banks or your conspiracy theory boogeyman of the day). Unfortunately it takes a severe lack of ethics to continue to advance trading in the unregulated market manipulated market. It is why I pulled out because I still have ethics to not involve myself in a business model expressly designed to manipulate vulnerable people. After all a business model is separate to the technology used and the technology while having some benefits had far more cons in later stages especially when combined with exchanges lack of morals.
Totally feel for those who lost when just holding on a corruptly run exchange, but 'people' buying hoping to make money are gambling and all investments are a gamble, there have been plenty of issues with regulated finance businesses, pump and dumps still happen. That is more the nature of people than the technology itself.
Personally, I don't lump Bitcoin with the 'other' crypto as it's decentralised meaning no one person controls it, it has a fixed maximum supply so additional cannot be printed diluting its value and uses a publicly viewable ledger providing surety of each transaction. I’d like to see where this technology goes.
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