New Zealand government report warns against crypto regulation overreach
August 19, 2023 5:26 AM
The government should encourage the growth of digital asset technology and regulate it in a cooperative fashion, according to a report compiled by an independent group for a House committee.
While calls for crypto regulation are growing stronger in many parts of the world, a report compiled for the New Zealand Parliament suggests taking things slowly and flexibly. In 2021, the New Zealand House of Representatives Finance and Expenditure Committee commissioned a report titled "Inquiry into the current and future nature, impact, and risks of cryptocurrencies."
A partner at MinterEllisonRuddWatts and an associate professor of business law at the University of Auckland collaborated on the 99-page report, which took into account public feedback and made 22 suggestions. It was generally optimistic about blockchain technology and digital assets.
The paper warned against overly restrictive regulations, stating they would "reduce the viability and competitiveness of such businesses as purchasers increasingly make payments in cryptocurrencies." This is despite the fact that cryptocurrencies have difficulties such as volatility, environmental effect, and criminal usage.
Furthermore, it warned against attempting regulation too soon:
"It would prove to be a challenging task to develop and implement a comprehensive set of regulations. […] From what we can tell, government institutions lack the resources and capability to deal with this issue."
Instead, we suggest dealing with issues as they crop up. In order to treat digital assets in accordance with current legislation, we advise the government and authorities to develop clear and consistent guidelines. Lawmakers in different countries can learn from the regulatory experiences of the United States, the United Kingdom, and Australia.
There must be some form of regulation. The Financial Markets Authority (FMA) is urged by the report to establish a sandbox for digital asset investments and a new category of property. A new subcommittee of the Council of Financial Regulators is proposed in the paper, with the FMA as its head. Its purpose will be to advise on, and coordinate a response to, "issues facing the industry."
It is recommended that a wider working group be formed to collaborate with the digital asset industry, including of members from all relevant government agencies (including police, tax authorities, the central bank, and others). The paper recommends that research into digital currencies by central banks be maintained.