Not long ago, the New Zealand Financial Markets Authority, also known as the FMA, published a commentary on initial coin offerings (ICOs) and digital currency services.

In its statement, the financial regulator declared that the economic substance of a given ICO, alongside a few other characteristics, can determine whether it is a financial product or not. The report proceeded to explain how ICOs can variously fall under the scope of managed investment products, debt securities, derivatives, equity securities, and the like. Therefore, companies holding such crowdfunding campaigns may have to fulfill certain regulatory requirements moving forward.

All tokens and digital currencies are securities

The agency further remarked:

All tokens or cryptocurrencies are securities under the FMC Act [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.

What’s more, the regulator stated that all businesses offering financial services related to digital currencies – think wallets, brokers, and exchanges – must comply with a law known as the Financial Service Providers Act of 2008. If a particular digital currency is not defined as a financial product, then associated businesses will need to comply with relevant trade regulations, as per the Fair Trading Act.

The FMA also commented that at this time, most of the online exchanges operating in New Zealand have no licenses and aren’t regulated. Therefore, if something were to go wrong, investors would have no legal recourse to recover their investment capital.

However, these statements lead us to believe that New Zealand is not actually planning to create any legislative framework for digital currencies and related services anytime soon. Some observers believe that the FMA wishes to inform the public that the organization takes no responsibility whatsoever should things go wrong.

Based on these points, what are your thoughts on the New Zealand FMA’s statements? Let us know in the comments.