Digital Asset Community – NZ Finance and Expenditure Committee Enquiry on Cryptocurrency
Digital Currencies are a global opportunity for New Zealand to compete – AND WIN
September 1st 2021 – The New Zealand community of Digital Assets and Blockchain (Cryptocurrencies) welcomes the recent government enquiry into the industry, with a significant caveat … Don’t break it!
Cryptocurrencies are part of a large and rapidly growing group of diverse financial and non-financial assets, and a component of a broader blockchain evolution in data infrastructure.
Blockchain technology enables moving from large monopoly tech companies to community-owned infrastructure for all kinds of applications – known collectively as Web3 or as many have called it – the third evolution of the internet itself.
The sector is still young and new to the public and decision-makers, who are often not familiar with the concepts underlying it.
The Finance and Expenditure Committee has undertaken self-derived terms of enquiry into cryptocurrencies (ie under no government mandate). These terms have a focus on the areas of opportunity, risk of abuse (illegal activities), power consumption, and the opportunity for regulation.
The Cryptocurrency industry is largely supportive of any government initiative that seeks to make the industry safer, more accessible, and aligned to New Zealand’s brand of trust.
This is achieved by aligning to existing initiatives and by mature and knowledge-based recommendations that can accelerate the market in the right way.
New Zealand is globally recognised as a place of trust as it relates to Cryptocurrencies. Most notably in the areas of:
- Compliance – the way in which the respective government departments (Department of Internal Affairs, Financial Markets Authority and Inland Revenue Department) have provided clear terms under which the market operates.
- Enablement – the way in which government entities (New Zealand Trade and Enterprise, Ministry of Business and Innovation and Callaghan) have supported the burgeoning growth of the industry for over 5 years.
- Capability – the entrepreneurial activity in New Zealand is underpinned by some of the world’s leading skills in developing and managing the businesses in the market.
- Support – the professional services skills across the legal, financial and advisory market is second to none. They are often engaged for guidance to their offshore peers.
All of which have unleashed a mature and innovative market of opportunity that is disrupting industries globally.
Cryptocurrencies are popular with New Zealand retail investors. A recent survey conducted for the Financial Markets Authority (FMA) has found 28% of investors have some form of cryptocurrency holding and 34% intend to be investing in cryptocurrency by next year.
This is significant as very few other industries have received this level of adoption. The industry has hundreds of businesses in its ecosystem and employs thousands of people.
Recommendations proposed for the cryptocurrency industry
The Cryptocurrency Industry recommendations to the Finance and Expenditure Committee are as follows:
- Seek to understand from experts in the field the truth behind claims about the environmental impact of some kinds of cryptocurrency networks. Also to acknowledge that there are different types of algorithmic settlement for cryptocurrency which do not use large amounts of power to achieve network consensus. That, like most technology sectors, the industry is constantly innovating to mitigate its impacts.
- Understand that cryptocurrency is a form of decentralised and immutable database technology and there are many types of assets and applications that can exist on it. The committee should seek to understand that cryptocurrency is not one single thing and as such care is needed when implementing policies and regulation so as to not risk damaging innovation in unintended ways.
- Engage the services of experienced people in this industry to ensure that lack of knowledge in a nuanced discussion is not an issue in terms of decision making.
- Recognise and understand the work already undertaken by the Reserve Bank, FMA, DIA and IRD who already have policies in place to guide the industry, taking the lead of the FATF’s guidance on cryptocurrencies and VASPs. That the best solution is for these agencies to continue to work with the industry to update and improve guidance as the industry evolves.
- That the above Government agencies work together with the Ministry of Justice (MOJ) and industry experts to determine if the regulatory settings for cryptocurrencies and VASPs are appropriate to mitigate the financial, money laundering and terrorism financing risks associated with cryptocurrencies, while still meeting the purposes of the FMC Act (which includes promoting innovation and flexibility in the financial markets) and the purposes of the AML/CFT Act. The timing of the Committee’s inquiry into cryptocurrencies and the MOJ’s statutory review of the AML/CFT Act is fortunate.
- Understand fully the market opportunity of cryptocurrency and blockchain architectures, how fast innovation is happening globally and how Kiwi companies can create more opportunities for investment, employment and innovation in New Zealand.
- Understand that market innovation should determine technology winners and losers rather than intervention from policy makers.
- Recognise that as an emerging technology sector there is a tendency for over sceptical popular narratives, that this is a frequent feature of any new market innovation so it’s important to understand any biases they may have due to these narratives and seek to mitigate them.
- Recognise that with any new technology there are incumbents who are being disrupted and as such there are vested interests in creating ways to block competition.
Quotes from the crypto industry
Below are quotes from crypto industry leaders in regards to the significance of cryptocurrencies, their impact on the economy, and the potentials of the blockchain industry:
“It’s important we understand opportunities and risks in detail and encourage responsible innovation in this emerging technology space which is already supporting a large amount of employment and investment in the economy of Aotearoa. Because of its open-source open innovation foundations it moves extremely fast and as such many of the misconceptions about the technology and who’s involved become outdated very quickly. We should continue the already good work of the NZ regulators in working with industry to promote responsible innovation and continued growth.“Aaron McDonald, CEO of Centrality
“We strongly encourage our politicians and regulators to look past the negative narratives and realise the massive opportunities for NZ in this space. Kiwis are already out creating world leading blockchain products, but without the right regulatory environment, we risk losing those businesses offshore. Blockchain and cryptocurrency provides a massive opportunity for NZ innovation, employment and GDP, in a fully digital sector where NZ’s geographical remoteness is not a detraction.”Janine Grainger, CEO of Easy Crypto
“Cryptocurrencies are a once-in-a-lifetime opportunity in terms of the creation of a new asset class. The underlying architecture provides for a transparent and democratised disruption of key industries (e.g. financial markets). Techemy’s customers are largely offshore and it has a clear understanding of its competitive advantage. It would be disheartening to see this opportunity slip from our (NZ’s) grasp ”Fran Strajnar, CEO of Techemy
“We welcome this Inquiry which will shine a light on the exponential growth opportunities presented by Cryptocurrency for New Zealand’s weightless industries including the creative and technology sector. Our values, market size and connected economy offer a unique platform to leverage underlying infrastructure and community governance models.”Andy Higgs, CEO of Centrapass
Other notable quotes from the tech industry include David Marcus, former president of PayPal and Vice President of Messaging Products at Facebook, and co-creator of Diem, a cryptocurrency project initiated by Facebook, says:
“It has never been more urgent to transform our broken payments infrastructure. The systems we have today are costly, slow, and not interconnected. There are still about 1.7 billion people who are unbanked around the world, and even more who are underserved… — people left behind by the current system and stuck in the cash economy. Globally the state of play for cross-border payments is dramatically bad with an average cost to consumers, who can afford it the least, of 6.5% (more than double the Sustainable Development Goal of 3%) and end-to-end settlement times of three days on average.
…if money and payments systems were invented today for a digital-only world, what would they look like? They certainly wouldn’t look like our current infrastructure. A global, open, interoperable, near real-time, cheap, compliant global protocol for money would be required to enable people, creators, and businesses to move money around seamlessly and to innovate via programmable money. Wallets would need to support NFTs. Real contracts and titles would be replaced by smart contracts.”David Marcus, former President of PayPal and VP of Messaging Products at Facebook
Get in touch
For further inquiries, Aaron, Janine, and Fran are available for interviews.
Credentials and contact details can be found in the links below:
Aaron McDonald – CEO of Centrality
Janine Grainger – CEO of Easy Crypto
Fran Strajnar – CEO of Techemy
Andy Higgs – CEO of Centrapass