19th August 2023 > > New Zealand.

tl;dr

New Zealand makes some tentative steps in the direction of crypto adoption.

Market Snap

Market Wrap

Global concerns for further interest rate rises dominate the investment landscape, for reasons that escape me. Rates will be much lower in a year’s time from now, as the debt burden for all governments becomes unsustainable without officially sanctioned market manipulation on the grandest scale aka quantitative easing.

Whilst risk assets continue to slide, BTC leveraged longs continue to suffer liquidations, reducing the open interest, but driving perpetual futures funding rates negative, increasing the risks of a short squeeze.

Curious Cryptos’ Commentary – New Zealand

The Finance and Expenditure Committee has prepared a report for parliament on the topic of crypto regulation:

https://www.interest.co.nz/sites/default/files/2023-08/crypto%20report.pdf

At 112 pages, and more than two years in the making, one hopes that this weighty tome contains some nuggets of wisdom.

As it’s Saturday, with most of the CCC research team out of the office, and those who are left heading to Brighton for a birthday BBQ and party, it is going to be hard to properly assimilate everything in this report. We will try to do our best.

…

The report opens with 22 recommendations. These do not inspire much confidence, as they consist primarily of platitudes such as these:

“We recommend that the Government ensure that regulators (in particular, the Financial Markets Authority (FMA) and the Commerce Commission) are well resourced to deal with bad actors in the digital asset space …”

“We recommend that the Government adopt a technologically neutral approach to regulation of the digital asset space …”

“We recommend that the Digital Assets Cross-Agency Working Group hold “blockchain-sprint” equivalent or similar events to develop new ideas and strategies for industry growth.”

“We recommend that secondary and tertiary educational institutions consider developing courses in relation to digital assets, blockchain, and the broader context, as part of a wider focus on technology …”

This sounds like a ChatGPT written report.

Given New Zealand’s deserved reputation for being one of the most illiberal democratic states in the world, no-one will be surprised by recommendation 22:

“We recommend that the Reserve Bank continue with design work on its central bank digital currency.”

…

Digging into the details shows us a more positive and constructive approach to cryptos that is not reflected in the tone of the 22 recommendations, which is a shame.

There is a discussion around those tired old tropes of criminal activity, and the supposed environmental impact of cryptocurrencies, but these are largely dismissed as being areas of concern, which is a welcome change to the usual narrative.

There is a whole section devoted to tax, or rather the problems in raising tax from cryptos, which is of course a favoured subject of all governments. But again there is some refreshing honesty on display:

“We understand the IRD is again looking at how to address these new challenges (particularly in respect of De-Fi). But we suspect that the New Zealand’s tax legislation will never be updated fast enough to keep up with the challenges in the cryptoasset sector.”

You can be sure that our very own HMRC would claim that tax rules around cryptos are clear and precise, a stance totally contradictory to the reality of the situation.

…

So, how are we left?

In general, this report is a welcome addition to the huge volume of bureaucratic contributions to the thorny subject of crypto regulation, which must be a good thing.