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Rehashed - #21 A Crypto Guidance Update from the Financial Markets Authority

The Role of the FMA

The Financial Markets Authority (FMA) have released their Annual Corporate Plan which outlines their objectives for the year ahead. As the governing body over capital markets in New Zealand, the FMA’s guidance has implications for regulation of the cryptocurrency space.

Naturally, as a capital markets regulator, the FMA is interested in creating an environment that spurs the growth of New Zealand’s capital markets. Their mandate covers anything from traditional public exchanges to more novel approaches to investing and capital raising. Because the cryptocurrency space has led to a novel capital formation process, known as Initial Coin Offerings (ICOs), these types of offerings can fall under the regulation of the FMA.

Guidance from the FMA

The FMA can help to decide if an ICO involves a financial product or a financial service, and whether “fair dealing requirements” are met. In their annual corporate plan, regarding ICOs, they outline their responsibility to promote innovation and flexibility, while ensuring appropriate safeguards are in place.

“Our goal is to encourage development of these sectors in a manner consistent with good customer outcomes.”

The FMA cites their intention to work with the wider NZ fintech community to develop initiatives around optimal regulation of the space. Specifically, the FMA encourages prospective ICO’s and cryptocurrency service providers to get in touch before initiating crowdfunding or launching a product.

“We encourage market participants to engage with us at the early stages when considering making an offer, introducing new products or services, or providing platforms that offer products and services to the public.”

Although there is still a large degree of regulatory uncertainty, the FMA seems to be encouraging an open dialogue and adopting a progressive approach to cryptocurrencies that will not stifle innovation.

Regulation in 2018 and Beyond

The crypto sphere largely looks to U.S. securities and commodities regulatory bodies, the SEC and the CFTC, for decisions regarding the uptake and establishment of crypto as its own asset class within capital markets. Earlier this year the SEC subpoenaed dozens of ICOs, however, they have yet to release any formal guidance regarding cryptocurrencies. Informal comments from the SEC suggest that projects are likely to be judged on their degree of decentralization.

So far, there has been a limited amount of ICOs crop up in New Zealand, however, we are likely to see this number increase under favourable regulatory conditions. The positive verbiage from the FMA’s annual plan is a great sign that they are open and willing to embrace new innovations in the capital markets. The FMA also boasts a dedicated cryptocurrencies page on their website that serves as a resource for prospective ICOs, cryptocurrency service providers, and the wider investor community. This is a win-win for all parties; ICOs can tap into a new investor pool whilst working alongside approachable regulators, and the retail investor crowd are exposed to novel opportunities whilst having a first line of protective defence in regulatory scrutiny from the FMA.

On a final note, as security tokens become more prolific, regulatory flexibility and open-mindedness from the FMA may provide a great opportunity for New Zealand to become leaders in capital markets innovation. More on security tokens next week.

 

In the News

Bitcoin volumes rise in Turkey as the local currency, the lira, tanks.

The Wall St. Journal published an exposé on the pump and dump schemes that leverage group messaging platforms to manipulate the crypto markets.

A 15-year-old hacked John McAfee’s BitFi crypto wallet, which has been promoted as “unhackable.”

The world bank has called on the Commonwealth Bank of Australia to create the first blockchain bond.

Prague was named the world’s top bitcoin city in the world. Perhaps unsurprisingly, given the Peso’s trouble, Buenos Aires came in second.

As Rehashed explored last week, security and liquidity are some of the factors that might still be holding back a positive Bitcoin ETF decision.

 

Upcoming Dates

August 15 - The Future of Blockchain, Digital Assets & Interoperability, Auckland

 

As always, thanks for joining - see you next week for Rehashed.

Freddie Archibald

 

View previous issue: Rehashed - #20 The Road to the Bitcoin ETF

View next issue: Rehashed #22 Sizing up Security Tokens


About the author:

Capital markets to crypto convert. From Christchurch →  Boston → New York, Freddie became intrigued by the potential of the digital asset economy after plucking a book on Bitcoin off a New York library bookshelf in 2016. Her parents are thrilled that she is chasing magic money on the internet.

 

Disclaimer:  The above references an opinion and is for informational purposes only. The opinions expressed by the author do not represent the opinion of BitPrime.

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