The Government has released its response this week to the Report of the Finance and Expenditure Committee on the inquiry into the future nature, impact, and risks of cryptocurrencies, published on 17 August 2023.
Partner Jeremy Muir was one of two independent advisers who prepared a report for the Committee that forms the significant second part of the Final Report, including 22 recommendations for government consideration.
A copy of the Government response is here and the original report can be found here.
Who should read this? Why?
The original 112-page report and the Government response on digital assets include 22 recommendations to help grow the digital assets sector. It is likely to be of interest to banks, consumers and anyone who deals with digital assets.
What does it cover?
The Government expresses support for the primary purpose of the report, that is to facilitate more discussion to ensure that New Zealand is well-placed to deal with digital assets and blockchain. Whilst the Government show support to grow the digital assets industry, they do note that the risks associated with digital assets, specifically, its use in ransomware, international crimes, and scams.
Whilst the report requests the Government to consider all recommendations, the response itself does not address each individual recommendation, instead they note that that some government entities currently have work underway which is aligned or relates to the report, such as:
- the Reserve Bank of New Zealand has been undergoing work which looks towards the future of digital assets, including the potential for central bank digital currency;
- the Council of Financial Regulators providing guidance to start-ups through its Digital and Innovation Community;
- the Ministry of Justice implementing recommendations to the AML/CFT treatment of virtual asset service providers;
- the Financial Markets Authority contining to provide guidance on digital assets, their treatment under the Financial Markets Conduct Act, and taking regulatory action against those who breach the financial markets law; and
- the Inland Revenue providing guidance and information as to the tax treatment of digital assets in New Zealand.
The Government response concludes that it will “continue to consider matters raised by the Committee and continue to monitor international market developments”.
Our view
Given the pace at which the regulatory response is developing overseas, together with the likely impact of the current renewed bull market for crypto assets, in our view, the Government needs to move to implement the recommendations in the Final Report, or even to look beyond them. There has been much water under the bridge since the underlying advisers report was originally submitted in October 2022.
What Next?
We are working with clients and industry groups (such as BlockchainNZ) to move the dialogue forward.
If you have any questions, or would like to be part of the conversation, please contact one of our experts.
This article was co-authored by William Ma, a Solicitor in our Banking and Financial Services team.
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