The FMA released a statement, outlining the ways in which token sales would be covered under national law.
Notably, the regulator said that tokens or cryptocurrencies are "securities" under the Financial Markets Conduct Act 2013 (FMC), even those that are not financial products.
The FMA said:
"A security is any arrangement or facility that has, or is intended to have, the effect of a person making an investment or managing a financial risk. ... If appropriate, we can designate any security to be a particular financial product based on its economic substance."
In other cases, tokens or cryptocurrencies can be classed as debt securities, equity securities, managed investment products or derivatives, depending on their characteristics.
If issuing those products, the FMA said that businesses in New Zealand must meet different regulatory requirements.
Tokens and cryptocurrencies that are not financial products or services must also comply with the Fair Trading Act 1986 to the extent that they are “in trade.”
Notably, the Fair Trading Act applies to "overseas-based tokens and cryptocurrencies offered in New Zealand" as well as to domestic offerings.
New Zealand-based token or cryptocurrency Regulators must comply with a number of further regulatory requirements, such as:
- formally register, and pay related fees for, the financial services they provide;
- become a member of a dispute resolution scheme if providing services to retail clients;
- comply with 'fair dealing' rules, which "prohibit misleading conduct and deceptive statements being made in relation to financial services"; and
- comply with anti-money laundering rules.
The FMA also pointed out that the FMC does not cover crowdfunding via ICOs, and encouraged stakeholders to engage with it “early in the development phase if you’re considering making an offer”.
It said it could help businesses "determine if tokens are ‘financial products’, and, if so, whether any exemptions are appropriate".
It added it could exempt some businesses from regulatory obligations in relation to their ICOs "to promote innovation and flexibility in our financial markets".