New Zealand’s FMA: all tokens are securities

New Zealand’s Financial Markets Authority publishes commentary ICOs and cryptocurrency services 
27 October 2017   1935

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.”

DFINITY to Postpone Internet Computer Launch

The project is currently assessing the time frame for the completion of the MVP
14 December 2018   67

The blockchain project Dfinity reported in its blog postponing the launch of its main product.

Previously, Dfinity chief scientist Dominic Williams said that his company intends to create an “Internet computer that will become cloud 3.0”, compete with Google Cloud and Microsoft Azure, and also change the face of the blockchain industry.

According to him, the project team is developing a technology that has 150 higher performance than Ethereum blockchain and 900 times - Bitcoin. In essence, the project creates a “giant Internet computer”, whose work will be supported not by one company, but by all participants of the Dfinity protocol.

Initially, the release of a minimum viable product (MVP) was planned for the first quarter of 2019. However, according to company representatives, working on a trimmed version may slow down progress in creating a complete product.

The project is currently assessing the time frame for the completion of the MVP. Also, noted in Dfinity, before the end of the first quarter a new set of development tools (SDK) will be released, which will shed light on the future plans of the company.

In August, the Dfinity Foundation attracted $ 102 million of investments in the framework of a closed tokensale. Prior to this, at the beginning of the year, the Dfinity Foundation raised $ 61 million from Andreessen Horowitz and Polychain Capital.