A report issued by the New Zealand parliament reveals that the regulators should not be in haste to formulate policies on crypto assets. The legislator recommended the regulators to adopt an agile approach when implementing cryptocurrency regulation.
Unlike regulators in other jurisdictions seeking to provide regulatory clarity on digital assets, the New Zealand parliament has advised the regulators to slow the rulemaking process on crypto assets.
New Zealand to Adopt Agile Regulatory Approach on Cryptos
The report titled “Inquiry into the current and future nature, impact, and risks of cryptocurrencies” was approved by the New Zealand Finance and Expenditure Committee in 2021. Before the commissioning, the legal practitioners from the MinterEllisonRuddWat and a professor from the University of Auckland provided valuable contributions at the primary phase of the report writing.
Based on their inputs, the report incorporated 22 recommendations from previous public comment data. Interestingly the authors of the 99-page report focuses more on the critical elements of digital assets and blockchain technology.
The report outlined the risks associated with crypto and blockchain technologies, including price volatility, financial crime and environmental implications. The report recognized that New Zealand has joined the ongoing crypto craze in Asia-Pacific.
The legislators claimed that most of the buyers in New Zealand prefer crypto payments to cash. Besides the negative outcomes of adopting crypto, the legislators outlined the need for the regulators to ease the restriction on digital assets. In the report, the lawmakers argued that by easing the crypto limits the digital sector will be more viable and attractive.
Impacts of Enacting Excessive Restrictions on Crypto Assets
Besides limiting excessive restrictions, the policymakers highlighted the dangers of regulating the crypto sector when it was too early. The report argued that by adopting a comprehensive regulatory framework might complicate the regulator’s efforts.
The New Zealand market regulators lack the proper equipment and adequate resources to regulate the crypto sector. Therefore the legislators advise the government and public agencies to invest in formulating crypto regulations that align with the existing law.
The proposed regulations will enable the regulators to address the challenges battling the crypto industry promptly. Before then, the legislators recommend the New Zealand regulators monitor the regulatory approach on crypto assets adopted in the UK, US and Australia.
Notably, monitoring the regulation action in other successful jurisdictions will help the regulators to make informed decisions. However, the legislator acknowledged that some regulatory restrictions on digital assets were inevitable.
In the recommendation section of the report, the legislators urged, the Financial Markets Authority (FMA), to develop a new class of investment for crypto assets. The FMA is also requested to ensure the new groups for digital assets have a sandbox and a personal property category.
The FMA has been tasked to chair a new subcommittee for the Council of financial regulators (CFR). The report demonstrated that the FMA would be required to guide the CFR in addressing the crypto sector’s challenges.
Overview of New Zealand CBDC Development
Besides the CFR, the report urges the regulatory agencies to collaborate with the law enforcers, tax regulators and the New Zealand central bank to supervise the operation of the crypto industry. The joint forces should support the central bank to continue the ongoing digital currency studies and pilot trials.
In July, the Reserve Bank of New Zealand confirmed that it might take years to implement the CBDC. The announcement revealed that the team behind the CBDC is at stage two of the development of digital fiat.
In the second phase of the development of the CBDC, the regulators are exploring suitable designs for digital currency. The developers anticipate completing the second phase in early January next year.
Afterwards, the regulators will proceed with the third stage, which will involve an assessment of the CBDC and multiple consultations. The final step will include the introduction of the CBDC, which is expected to take a little longer than the projected timelines.
The New Zealand regulators anticipate that implementing the CBDC will safeguard the country’s monetary policy from the economic crisis.
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