The Reserve Bank of New Zealand (RBNZ) has said it would be increasing its efforts in monitoring stablecoins and crypto-assets but won’t propose a regulatory approach citing uncertainties in the sector’s development. The move comes after public input on the issues these new forms of private money could lead to for the financial system and monetary sovereignty.
RBNZ says regulatory approach not needed now
Ian Woolford, director of money and cash at the Reserve Bank of New Zealand, said that the decision was made in response to feedback from the public that helped validate potential concerns about the financial system and monetary sovereignty that stablecoins and other new forms of private money would cause.
A summary of 50 stakeholder submissions on a prior RBNZ investigation into cryptos and decentralized finance was provided along with Woolford’s announcement. Banks, including Westpac and the Bank of New Zealand, as well as the nation’s crypto advocacy group BlockchainNZ and technology startup Ripple, participated in the survey.
According to Woolford, the submissions demonstrated that cryptocurrency had “significant risks and opportunities” in addition to “uncertainties” regarding the sector’s future, necessitating additional scrutiny.
The RBNZ appears to be holding off on taking action until it sees how other countries regulate cryptocurrency. Woolford believes that global harmonization is essential to ensure effective regulation. He noted that best practices might become clearer as foreign systems are implemented.
Current New Zealand law regards cryptocurrency as a type of property. Different non-crypto-specific financial, money laundering, and tax legislation generally applicable regulate digital assets in the country.
According to Woolford, the problems brought on by the innovations are outside the agency’s authority. He said that regulatory hurdles to entry, investor and consumer protections, and consumer and investor protections are important if the nation wishes to develop a trustworthy and effective financial system.
While the possible uses of crypto assets as money were the proceedings’ main focus, the RBNZ also provided its most recent stance on central bank digital currency (CBDC). The release stated that although they are exploring a potential CBDC, they have yet to decide on the need for one. If they do introduce a CBDC, it will only replace the cash that will be available, they added.
Crypto adoption in New Zealand is still low
NZ has a low adoption rate for cryptocurrencies. New Zealand was placed 108th out of 146 countries in a Chainalysis analysis from 2022, barely ahead of Azerbaijan and just behind Austria.
As major banks in the region enforce stricter crypto controls on transactions and bank accounts of industry players, Easy Crypto, a New Zealand-based company, accused them of bullying. The major banks in New Zealand responded to accusations of “bullying” by expressing their opinion on the restrictions that many players in the industry believe are too stringent. The banks believed a harsh stance was required considering the risks connected to cryptocurrency globally. Furthermore, they believe there is no room for leniency given the market’s general position.
While Huobi stopped offering futures trading services to New Zealand, Binance was registered as a financial service provider. Comparatively, the Binance Australia financial services license was canceled in neighbouring Australia. Earlier, Australian senator Andrew Bragg advanced a bill calling for stricter regulation of the local crypto market.
