New Zealand confirms cryptocurrencies are securities

The Financial Markets Authority said that businesses that issue tokens and cryptocurrencies in return for investment in the country will be considered to be issuing securities

What has happened?

New Zealand’s financial regulator has published commentary on token offerings (ICOs) and cryptocurrency services and warned of the risks associated with cryptocurrency investments.

What does this mean?

The Financial Markets Authority (FMA) has 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 issuers 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".


The FMA also cautioned against the dangers of cryptocurrency investment.

“Things to look out for” included:

  • cryptocurrency value can change quickly; 
  • your ‘coins’ may be stolen; and 
  • cryptocurrencies are not widely accepted.

To reduce risk, the FMA encouraged investors to ensure that any exchange used is:

  • based in New Zealand;
  • a member of a dispute resolution scheme; and
  • holds your New Zealand Dollars in a trust account.

Next steps

If you want to take advantage of blockchain's huge potential and disruptive impact, while avoiding falling foul of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.

John Salmon


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