Digital Currencies, ICO-Based Tokens Are Securities, Says Kiwi Finance Regulator

The New Zealand Financial Markets Authority (FMA) has claimed that the cryptocurrencies or any initial coin offering (ICO)-derived token will be considered as a security in the country. The decision was detailed in the new guidance on ICOs and virtual currencies, that was released by the agency.

In its statement circulated in late October 2017, the FMA claimed that any digital currency or ICO-obtained token would be considered as a security. The finance regulator also explained the various means in which token sales will be covered under the country’s national law.

"All tokens or cryptocurrencies are securities under the [Financial Markets Conduct Act 2013] – 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."

Highlights of the FMA guideline

Under its issued guidance, the FMA stated that the ICO tokens could be considered as one of the four financial product categories, namely, debt securities, managed investment products, equity securities and derivatives. The agency further explained that the tokens will be classified based on their characteristics.

"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.”

The FMA guidance included guidelines on how to treat businesses involved with the new technology.

The agency claimed that all major companies offering key virtual currency services like wallets, brokers and exchanges should be properly registered with the appropriate government agencies. The regulator also stated that it could exempt companies from existing laws in its bid to “promote innovation and flexibility.”

"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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