New Zealand’s FMA: all tokens are securities

New Zealand’s Financial Markets Authority publishes commentary ICOs and cryptocurrency services 
27 October 2017   2491

New Zealand’s Financial Markets Authority publishes guidance on ICOs and cryptocurrency services, as the FMA wants to "facilitate responsible innovation, and ensure that the regulatory regime remains relevant and agile". 

Initial coin offerings 

The extent to which an ICO is regulated depends on whether a "financial product" is being offered to retail investors in New Zealand. The Financial Markets Conduct Act 2013 sets out four types of financial product:

  • debt securities
  • equity securities
  • managed investment products
  • derivatives.

The FMA further explains each type of the product in detail. What's important, it has been clearly stated that all tokens are to be considered securities.

All tokens or cryptocurrencies are securities under the FMC Act – 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. If appropriate, we can designate any security to be a particular financial product based on its economic substance.
 

The FMA guidance

The guidance also highlights that crowdfunding in the form of an ICO is not the same as crowdfunding covered by the FMC Act. The FMA licenses crowdfunding platforms to provide an intermediary service via a facility, such as a website, where companies make offers to retail investors. Crowdfunding under the FMC Act enables companies to raise up to $2 million in any 12-month period, without registering a PDS.

It is stressed that the ideas regarding the possible regulation of ICOs and token offerings include creating a new category of prescribed intermediary service similar to the equity crowdfunding model. This would require law reform and that can take a long time. 

Cryptocurrency services

Tokens and cryptocurrencies that are not financial products or services must comply with the Fair Trading Act 1986 to the extent that they are “in trade.” Notably, the Fair Trading Act also applies to tokens and cryptocurrencies that are offered in New Zealand but based overseas.

The FMA points out that the FMC Act does not cover crowdfunding via ICOs, and encouraged stakeholders to engage in conversation with the regulator “early in the development phase if you’re considering making an offer.”

Poloniex to Receive GRAM Listing Application

The application was filed by the head of the Gram Vault custodian and Blackmoon COO Sergey Vasin before the SEC's lawsuit
22 October 2019   70

The head of the Gram Vault custodian, Sergey Vasin, filled out an application for listing on the Poloniex exchange before the SEC filed a lawsuit against Telegram.

According to Vasin, who is also a Blackmoon COO exchange, Gram Vault stores 50% of tokens from the first round and 75% of tokens from the second round of sales.

He also added that Telegram does not work directly with exchanges. The document was at the disposal of CoinDesk.

SEC asked Telegram for information on possible Gram trading on the Coinbase, Poloniex, Bittrex, Huobi, Binance, Blackmoon and Liquid exchanges. Only the last two and Coinbase Custody previously announced token support.

Recall that the SEC lawsuit has already forced Telegram to postpone the launch of TON in the spring of 2020.