Before cryptocurrencies and blockchain emerged in New Zealand, entrepreneurs relied on intermediaries to make personal transfers. With the widespread adoption of crypto, transactions can be completed in seconds without any third-party intervention, and funds can be transferred anywhere on the planet, something no other traditional system can offer. For this reason, New Zealand has begun to see this asset as having great potential for its economy, and therefore offers a legal framework for cryptocurrencies, albeit not a specialized one.

 

Today, more and more foreign investors decide to apply for a crypto license in New Zealand. This jurisdiction is considered a cryptocurrency paradise due to the legality of crypto-assets and great support from the government. New Zealand has every chance to become a center of blockchain technology and fintech in the near future thanks to the government’s flexible and innovative approach to this promising sector of the economy.

 

While the overall legal framework for cryptocurrencies in New Zealand is safe and sound compared to other jurisdictions, the country does not recognize bitcoin and other altcoins as currency or legal tender, and still classifies any virtual currency as property. At the same time, cryptocurrency is officially allowed to pay salaries here, confirming a progressive stance on the blockchain legal regime.

 

If you are looking for a suitable jurisdiction for your own cryptocurrency business, then obtaining a crypto license in New Zealand will prove to be a beneficial solution. The licensing process here has certain nuances, which are important to consider in order to avoid being rejected by the Regulator or delaying the issuance of the permit. For this reason, we recommend using the services of Lawrange, whose specialists have extensive experience and the necessary knowledge to successfully pass the licensing process in New Zealand.

 

 

Peculiarities of cryptocurrency regulation in New Zealand

New Zealand is one of the friendliest countries for virtual currencies, but it is not yet characterized by significant regulatory reforms. The Inland Revenue Department (IRD) treats cryptocurrencies as property and does not consider them legal tender. Profits from them are taxable and losses can be claimed. In other words, cryptocurrency is owned here in the same way as owning shares in a company.

 

It is quite difficult for governments to regulate the cryptocurrency sector, as the nature of the storage system within the blockchain makes it difficult to determine who owns what due to the near total absence of any identifying information. While the rules will gradually become more specific, legislation in this area is still currently in the draft stage. But it’s worth noting that the IRD is tightening reporting requirements for cryptocurrency owners and keeping an eye on the investor information they receive from New Zealand exchange companies. This means that over time, the cryptocurrency sphere will be followed more closely.

 

The Financial Markets Authority of New Zealand (FMA) is the body that regulates financial activity in the country, including cryptocurrencies, and in doing so is guided by long-standing laws:

 

  • “The Financial Markets Conduct Act 2013 (FMCA) is the primary law applicable to financial products, including cryptocurrency. The FMCA requires issuers of financial products to comply with fair dealing and operational obligations.
  • “The Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act of 2013) – implementation of this Act is overseen by supervisory authorities such as the FMA (large businesses), the Reserve Bank of New Zealand (activities of banks and non-bank depositors) and the Department of Internal Affairs (DIA), which oversees New Zealand’s virtual asset service providers, including cryptocurrency exchanges, brokerages and token issuers.

 

Also in New Zealand, the Fair Trading Act 1986 (FT Act) and the Consumer Guarantees Act 1993 protect consumers. They are enforced by the Trade Commission. These regulations are used to regulate the field of crypto assets, which are considered financial products.

 

This kind of regulation is concerning:

 

  • Exchange activity – brokerage companies offer fiat to cryptocurrency conversion.
  • Wallets – the services provided are to store cryptocurrency from a third party.
  • Brokerage activities – organization of transactions with cryptocurrency assets.
  • ICO is the issuance and initial coin offering.

 

If you are interested in registering a crypto license in New Zealand, it is recommended that you obtain legal advice regarding your obligations. When offering any financial service in this country, you should avoid the risk of misleading other parties about your activities.

 

 

Important! ICOs in New Zealand are treated with a rather cautious attitude – such projects are analyzed strictly on a case-by-case basis to ensure that the appropriate regulatory framework is applied. Each ICO token is then categorized as a managed investment product, a derivative instrument, or referred to as an equity or debt security.

 

Advantages of obtaining a crypto license in New Zealand

New Zealand is an active participant in the crypto market and is constantly improving the conditions for doing business related to cryptocurrencies, including gaming platforms. The country has seen a rapid increase in investor interest in cryptocurrencies. However, it remains to be seen how long the country will maintain its reputation as a cryptocurrency-friendly country. New Zealand may soon have to adopt strict restrictions and tighten controls in the crypto space to stay in line with other countries. However, for now, the government’s loyal approach to cryptocurrency allows foreign entrepreneurs to take advantage of some important benefits.

 

Ubiquitous use of cryptocurrencies in the country

In addition to locally available global brands that accept cryptocurrency, such as Microsoft, Starbucks and others, New Zealand is expanding the variety of services on which you can spend your bitcoins. In most cases, the digital coins are available for the purchase of vouchers, which can then be indirectly used at participating outlets. Digital assets can be used as savings for a pension fund in New Zealand. That said, there are financial fund management bodies that can provide advice and help with investments.

 

The IRD estimates that by 2023, 6-10% of New Zealanders will already own bitcoins or other digital assets (worth around 300,000 kiwi). At the moment, almost everyone has virtual coins, and experts are confident that this number will increase significantly in the coming decades as more New Zealanders realize the benefits of globally adopted, technologically advanced crypto assets. For this reason, obtaining a crypto exchange license in New Zealand will prove to be extremely beneficial for those wishing to expand their customer base.

 

Trust of the international community and customers

The country is considered one of the major financial centers of the world, while it is not included in any of the existing blacklists. New Zealand is a member of the World Trade Organization and the OECD, the British Commonwealth, which confirms its safety and reliability in the eyes of investors. A common law system based on the British legal tradition operates here. For this reason, a crypto license obtained in New Zealand will be highly valued by your clients, partners and potential investors.

 

Crypto tax incentives in New Zealand

While it is impossible to avoid paying taxes on cryptocurrency entirely, entrepreneurs can expect some deductions and a lower tax bill in New Zealand. In this jurisdiction, additional costs associated with the purchase of a crypto asset, such as transaction fees, are considered deductible expenses. These can be offset against profits, helping to reduce your overall tax liability. While transaction fees may seem insignificant individually, when accumulated over a year, they can add up to a significant amount.

 

Losses are not always bad news. If you incurred losses while trading or investing in cryptocurrencies during the tax year, it is possible to offset them against capital gains and claim a tax deduction, but provided there is a detailed account of all losses and you have reported them to the IRD.

 

To claim a capital loss, you must provide evidence of the theft or loss, such as a police report or a statement from a reputable cryptocurrency exchange, and keep records of the value of the cryptocurrency, the date it was acquired and the date it was lost. By doing so, it will be possible to offset your capital losses with capital gains from other sources, which will reduce your overall tax liability.

 

Main types of activities

The FMA regulates cryptocurrency-related organizations that fall under the category of financial services businesses depending on their activities.

 

Blockchain companies with initial coin offerings (ICOs)

By registering in New Zealand, ICO enterprises receive official status, access to tax benefits and special incentives for development. All types of work with ICOs are categorized as securities transactions. At the same time, FMA notes that regulatory measures for initial token offerings are determined taking into account what kind of financial product will be offered. The regulator also emphasizes that ICO is not related to “crowdfunding” in the sense in which the term is understood in New Zealand – here, in fact, crowdfunding platforms operate under an individual license.

 

Provision of crypto-wallet services

Wallet providers in New Zealand are in the business of storing and exchanging cryptocurrencies. The law categorizes their activities as “value transfer services”. If your firm is a wallet provider, while facilitating exchanges between crypto assets or between fiat and crypto, then you are “operating a value transfer service”.

 

Peculiarities of stock exchange regulation

Depending on the specifics of the business, exchanges are:

 

  • Issuing their own crypto assets in order to facilitate trading, so they fall under the category of financial services “issuance and management of payment instruments”.
  • Providing trading in crypto assets, category “provision of value transfer services”.

 

Cryptocurrency prices tend to be quite volatile, largely because they depend on the sentiment of the rest of the market. This can be called one of the main differences between crypto and traditional stocks and bonds.

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If a company provides trading in crypto assets that are classified by the FMC Law as financial products, it is not excluded from the possibility of managing the relevant market. In such a case, a financial license may be additionally required.

 

Cash or property services (including custodial services)

If a firm organizes the execution of transactions involving crypto-assets, then this means that it provides a financial service “for the transfer of value”. Accordingly, by providing custody or administration of crypto-assets, the firm’s activities fall within the concept of “holding, investing, administering or managing money, securities or investment portfolios on behalf of third parties”.

 

Main requirements for cryptocurrency service providers

In order for a company to legally operate in a jurisdiction, it must fulfill several requirements of the Regulator:

 

  • Register with the Financial Service Providers Registry (FSPR) – New Zealand registered crypto companies, particularly trading platforms, are required to provide access to general information about themselves, including address, list of services, documents and dispute resolution details.
  • Be a member of a Dispute Resolution Service (DRS) – To operate legally in New Zealand, a cryptocurrency service provider must be a member of a Dispute Resolution Service (DRS). These organizations are in charge of regulating disputes. Each DRS has its own rules regarding the complaint process and how a legal entity should proceed.
  • Comply with fair business practices – crypto companies are prohibited from engaging in activities that mislead customers. If the overall impression of a trading platform’s website, social media sites and promotional materials is misleading, this would be a violation of the fair business practices requirements.
  • Compliance with AML policy – all virtual service providers registered with the FSPR must ensure that the handling of cryptocurrencies on their platforms complies with the “Anti- Money Laundering Act” 2009. Companies must be able to accurately identify each customer. As they collect personal information, they will also need to ensure that security measures are in place to protect user information.

 

Steps to obtain a cryptocurrency license in New Zealand

A license for cryptocurrency exchange in New Zealand can be obtained by overcoming several steps. For successful licensing, it is recommended to enlist the support of Lawrange’s qualified professionals who are ready to provide comprehensive support for the process.

 

Company registration

The business and physical office must be registered in the jurisdiction. It is necessary to determine the type of activity, which determines the type of license. State duties must be paid for each type of financial services. It is important that the company has a system of internal rules and procedures that will prevent the risk of cheating clients. All New Zealand companies must have at least one director who is present in the country for more than 183 days in a 12-month period.

 

Collection and preparation of necessary documents and business plan

A crypto license in New Zealand is issued upon submission of a pre-prepared documentation package, which should consist of:

 

  • A completed application form – an official document confirming the fact that the company has a desire to obtain authorization to conduct crypto-business in the country. It is important that it is properly executed, exclusively within the established requirements.
  • Copies of corporate documents proving the legality of your business. This may be Articles of association or a certificate of registration.
  • A business plan is a document with a detailed description of the cryptocurrency company, goods and services provided, targets, strategy. It should contain forecasts of economic indicators for the next 3 years.
  • Evidence of the financial stability of the legal entity – this could be, for example, bank statements or financial reports.
  • Copies of passports and profile data of the owners of the firm, as well as its management staff – required by the Regulator to ascertain experience and qualifications in the field.
  • Certificates of absence of criminal records of the firm’s executives.

 

Applying for and obtaining a license

The application with a ready package of documents is submitted to the FMA online on the official website of the organization. Then the Regulator proceeds to check your application, paying special attention to finding out:

 

  • the nature of financial services;
  • the estimated size of the market;
  • of the leadership team;
  • the internal control and regulatory technologies used.

 

It may take 7-12 months to review the application. If the licensee meets all legal requirements, a New Zealand cryptocurrency license is issued.

 

Taxation of certain crypto transactions in New Zealand

Some taxable crypto transactions in this jurisdiction:

 

  • When using cryptocurrency for business, any profits made are subject to income tax.
  • When cryptocurrencies are sold or exchanged, the gain is considered a capital gain and is taxed accordingly.
  • When crypto is received as payment for work, it is considered taxable income and is therefore reported on your tax return.
  • Profits earned from investments in cryptocurrencies are subject to capital gains tax.
  • Crypto-mining is considered a service and any income generated by it under the latest update to the rules is subject to Goods and Services Tax (GST).

 

However, in almost all cases GST is zero because the service is offered to blockchain companies established outside New Zealand. The tax rate applicable to income derived from mining depends on the category to which the activity falls.

 

According to the IRD, buying cryptocurrency with fiat is not a taxable event. Cryptocurrency assets do not give rise to a tax liability unless they are sold. Any sale, trade, exchange or transfer of cryptocurrency and conversion of crypto is subject to capital gains tax. The tax treatment of crypto assets varies depending on the specific circumstances of each case.

 

Other situations where cryptocurrencies are taxable:

 

  • Gift – if the value of the gifted assets has increased since they were acquired, income tax should be paid on the increased value. A person who has received gifts is not liable to pay tax.
  • ICOs and DAOs are treated similarly to cryptocurrency trading, and are therefore taxed accordingly.
  • DeFi transactions, like any other investment, may be subject to income tax,capital gains tax or goods and services tax (GST) depending on the specific circumstances.

 

The operation of crypto companies implies the application of tax:

 

  • Corporate – standard rate of 28%.
  • In the form of social security contribution – the minimum rate is 3% of salary.
  • For fringe benefits applicable to certain employers, the rate is from 49.25%.

 

Why you should contact Lawrange

If you are launching a New Zealand crypto company, our team can assist you with applying for and obtaining a cryptocurrency exchange license in New Zealand. Taking into account the features of New Zealand legislation and the individual nature of each type of crypto assets and ICO, our professional legal assistance with detailed advice will be extremely helpful – the registration of a crypto license in New Zealand will be carried out in accordance with the regulatory requirements.

 

Lawrange’s main benefits:

 

  • Integrity – provide comprehensive and in-depth information regarding the success of licensure at each stage.
  • Promptness – the use of modern material and technical base in our work together with rich experience and deep knowledge of the legislation will allow us to register a crypto license in New Zealand as quickly as possible.
  • High quality – services in Lawrange are provided by real professionals, each specialist has a high level of qualification in a particular area of law, and is constantly improving it.
  • Lawrange specialists are ready to provide assistance at all stages of obtaining a permit document. If you are interested in making this process much easier for yourself, then contact us in a way that is convenient for you.

 

FAQ

What is the length of the licensing process in New Zealand?

It can take between 7 and 12 months to obtain authorization, but there is a possibility that this timeframe could be extended if the Regulator requires additional information.

 

Are there tax-free crypto transactions in New Zealand?

Yes. Cryptocurrency is not taxable for the purchase of goods or services for personal use up to $60,000. Also, you will not have to pay tax if you donate cryptocurrency to a registered charity or any individual up to $6,000.

 

When to file tax returns in New Zealand?

For those wishing to run a crypto business in New Zealand, it is important to know that the tax year here runs from April 1 to March 31 of the following year. If you file your tax return later than the deadline, you may face penalties and additional fees.

 
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