The New Zealand Parliament has received an insightful report advocating a deliberate and cooperative strategy for regulating the realm of cryptocurrencies. While the global call for crypto regulation grows louder, the report, commissioned by the Finance and Expenditure Committee of the New Zealand House of Representatives in 2021, puts forward a nuanced perspective.
Titled “Inquiry into the current and future nature, impact, and risks of cryptocurrencies,” this report aims to foster digital asset technology’s growth while maintaining responsible oversight.
Advantages of a Prudent Approach
In contrast to the prevailing sentiment favoring swift enforcement-based regulations, the report suggests a more measured and agile methodology. The 99-page report scrutinizes public input received previously and offers a comprehensive set of 22 recommendations.
It was collaboratively penned by a partner at the esteemed law firm MinterEllisonRuddWatts and an associate professor of commercial law at the University of Auckland. Further, it embraces the broader potential of digital assets and blockchain technology, highlighting their transformative impacts.
Balancing Challenges and Opportunities
Recognizing challenges posed by volatility, environmental concerns, and illicit usage, the report, nonetheless, advocates against overly stringent constraints. It articulates that such rigidity might
“diminish the practicality and competitiveness of businesses, as more consumers opt for cryptocurrency payments.”
Furthermore, the report exercises caution against preemptive regulation, stating:
“Constructing and implementing a cohesive [regulatory] framework would be a multifaceted endeavor. […] As we comprehend it, the governing bodies lack the resources and infrastructure required to effectively manage this.”
The report’s alternative proposal suggests tackling issues as they arise. It advises that both the government and regulators collaboratively establish clear and uniform guidelines for the treatment of digital assets within the existing legal framework. A prudent course of action would be for legislators to observe the regulatory evolution in the United States, United Kingdom, and Australia before charting a local course.
Strategic Steps Forward
While some regulatory measures are inevitable, the report introduces a forward-thinking approach. It advocates for the Financial Markets Authority (FMA) to institute a fresh investment category dedicated to digital assets, complete with a sandbox environment, as well as a distinct category for personal property.
Additionally, the report recommends the FMA to lead a specialized Council of Financial Regulators subcommittee. This subcommittee would provide expert advice and a synchronized response to the challenges faced by the crypto industry.
To foster a comprehensive approach, the report underscores the necessity of forming a robust working group comprising representatives from various government bodies, including the police, tax authorities, and the central bank. This diverse assembly would collaborate with the digital asset sector to foster innovation while ensuring compliance and security.