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Are Cryptocurrencies Securities? New Zealand FMA says Yes

Kristina Frunze | Nov. 2, 2017
Are Cryptocurrencies Securities? New Zealand FMA says Yes

Cryptocurrency market slowly and steadily falls under the regulatory laws of various countries. One of the latest supervisors to look into the crypto regulation - New Zealand FMA.  Are Cryptocurrencies Securities? New Zealand FMA says Yes!

2 November, AtoZForex The primary financial regulator of the New Zealand, Financial Markets Authority (FMA) has informed a public about its latest regulatory decision.

In fact, many global regulators have been already concerned with the question whether cryptocurrencies are securities. Last week, the New Zealand FMA has ruled out that they actually are. Let’s look deeper into the decision of the supervisor.

Are Cryptocurrencies Securities? New Zealand FMA says Yes

The New Zealand regulatory body has published the following statement earlier last week:

"All tokens or cryptocurrencies are securities under the – even those that are not financial products. 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."

As you might have noticed, the FMA has also decided to consider ICOs as securities. Earlier this summer, one of the key US financial regulators, the Securities and Exchange Commission (SEC) has also ruled out that ICO tokens might be securities. Thus, they can be subject to federal securities laws.

Moreover, the developments of ICOs haven’t gone by unnoticed for the Canadian Securities Administrators (CSA). The umbrella organization, which coordinates the provincial Canadian regulators, clarifies that all ITOs and ICOs subject to Canada Securities Law. The full statement of the CSA explained:

“The Securities laws in Canada will apply if the person or company selling the securities is conducting business from within Canada or if there are Canadian investors. We note that these products may also be derivatives and subject to the derivatives laws adopted by the Canadian securities regulatory authorities, including trade reporting rules.”

How will cryptocurrencies be classified?

Now, the FMA also stated that tokens could fall into one of four financial product categories. These include debt securities, equity securities, managed investment products or derivatives. The classification of the tokens will be depending on their characteristics. Moreover, the FMA has added:

"If appropriate, we can designate any security to be a particular financial product based on its economic substance. For example, a project token giving investors voting rights and a share in the company and its profits could be designated an equity security.”

In addition to the statement, the regulator of New Zealand has published the guidance for businesses working with this technology. The regulator highlights that is has a category for all the cryptocurrency services, and thus, they should get an appropriate registration.

"We can grant exemptions to promote the FMC Act’s objectives. One objective is to promote innovation and flexibility in our financial markets. We can also, if appropriate, grant exemptions to ensure FMC Act requirements are fit for purpose for ICOs."

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ, nor should they be attributed to AtoZMarkets.