What are Cryptocurrencies?
Recognised by the IRD as Crypto Assets, they are cryptographically secured digital representations of value that can be transferred, stored or traded electronically. They typically use some form of distributed ledger technology such as blockchain to confirm and verify transactions.
In other parts of the world, they’re known as cryptocurrencies, digital tokens, virtual currencies, digital financial assets, and cryptographic assets.
Here are the different types of currencies that have been developed so far…
Crypto Assets that are intended to be used for online payments or exchanges. For example, Bitcoin and Litecoin are often called payment tokens, exchange tokens, intrinsic tokens, or simply cryptocurrencies.
Crypto Assets that represent existing financial assets or property (mirror securities like shares or debt) are typically called security or asset tokens.
Cryptoassets that are more like traditional payment vouchers are often called utility tokens because they can be used to gain direct access to specified goods or services.
If you’d like to learn more about how cryptocurrencies work, you can refer to our guide.
Where to buy?
It is recommended by the FMA that you use a New Zealand-based trading platform, as this offers a minimum level of protection for your crypto purchases. These platforms are registered on the NZ financial service providers register (FSPR) and are required to belong to a dispute resolution scheme by law.
Much like the local trading platforms, there are also some overseas that are registered financial providers in their respective regions, and can too be used to purchase cryptocurrencies in NZ.
Most crypto trading platforms provide new user incentives and bonuses too, often in the form of FREE crypto or Cashback on trading fees, to get users to start using their platform long-term.
If you’re unsure about which platform to choose, read our guide on how to choose a crypto exchange with Coinfall.
Here are our top-rated crypto exchanges for New Zealand! You can compare more on our website!
How to purchase it?
Let’s take a look!
Open an account with your chosen crypto platform.
Complete the identity verification, which is usually in the form of a KYC verification to prove your identity.
Once the verification is complete, you’ll be able to use more features on the crypto platform (such as buying and selling). If the chosen crypto platform cannot operate in NZ, this will also be advised to you with restrictions placed in your account.
Locate and find the Buy / Purchase option on your chosen crypto platform.
Choose the amount in cryptocurrency you wish to purchase – note that there are some minimum purchase amounts that are set by the platform.
Follow the instructions on the prompts, carefully checking the amount, network fees, and other costs which will all be displayed to you.
Choose your preferred payment method – usually done by a credit / debit card or a direct bank transfer. Then confirm the purchase!
Congratulations! Your crypto purchase will be in your account in no time – depending on the chosen cryptocurrency network (which coin you buy), the waiting times can vary from 15 minutes to 1 hour.
Recognized as an Asset
It’s important to note know that in New Zealand, the FMA considers all cryptocurrencies to be a form of property rather than a medium of exchange. They have not regulated currencies in New Zealand just yet.
Much like gold, it’s recognized to be incapable of generating any income and is acquired for sale purposes in hope of generating profits. Therefore, the IRD requires that you file a tax return when you have taxable income from your crypto asset activity.
You can be taxed on crypto activity such as buying, selling, swapping, and mining, as well as airdrops and hard-forks!
However as crypto transactions are typically pseudonymous with no uniform guidelines, there are no government measures to track the sale of assets by individuals just yet.
CBDC for New Zealand?
Like many other central government banks around the world, the Reserve Bank of New Zealand is also in the process of developing a Central Bank Digital Currency (CBDC) for the $NZD within the next 5-7 years.
CBDC provides a means for governments to regulate the crypto space in the region, maintain its economic standards, and provide a more accessible and secure environment for local investors – free of scams and other criminal activities or ventures.
With blockchains and cryptocurrency technology fast approaching all parts of the world in multiple industries, many agree that some level of centralized outside control can be beneficial to the entire crypto ecosystem.