While the cry for crypto regulation is becoming ever louder in much of the world, and regulation by enforcement is a controversy, a report prepared for the New Zealand Parliament has recommended a slow, agile approach. The report was commissioned by the Finance and Expenditure Committee of the New Zealand House of Representatives in 2021 and titled “Inquiry into the current and future nature, impact, and risks of cryptocurrencies.”
Cowritten by a partner at the law firm MinterEllisonRuddWatts and a University of Auckland associate professor of commercial law, the 99-page report considered previously solicited public comments and offered 22 recommendations. It took a favorable view of digital assets and blockchain technology as a whole.
In spite of challenges such as volatility, environmental impact and criminal usage, the report cautioned against excessive restrictions, saying they would “reduce the viability and competitiveness of such businesses as purchasers increasingly make payments in cryptocurrencies.”
It also cautioned against trying to regulate too early:
“Creating and implementing an integrated [regulatory ] framework would be a complicated endeavour […] Based on our understanding, agencies are not resourced or equipped to manage this.”
“Instead, we recommend that problems are addressed as they arise. We recommend that the Government and regulators create coherent and consistent guidance on the treatment of digital assets under current law,” the report added. Legislators can observe regulatory progress in the United States, United Kingdom and Australia before making local decisions.
“Because it is early in the development of digital assets and blockchain, we recommend that the Government and regulatory agencies proceed carefully and do not design and implement a fully integrated and consistent regulatory framework for digital assets at this point in time.… pic.twitter.com/A8uDtX3yZK
— Joshua Rosenberg (@_jrosenberg) August 18, 2023
Some regulatory measures are unavoidable. The report recommends the Financial Markets Authority create a new class of investment for digital assets, with a sandbox, and a new class of personal property be created. In addition, it is proposed to lead a new Council of Financial Regulators subcommittee to provide advice and a coordinated response to “issues facing the industry.”
A larger working group with representatives from all government agencies concerned – police, tax authorities, the central bank and others – should be formed to work with the digital asset industry. Central bank digital currency research should continue, the report concluded.