25 October 2017
FMA commentary on ICOs and cryptocurrencies
The Financial Markets Authority (FMA) has published commentary on initial coin offers (ICOs) and cryptocurrency servicesalongside online resources for investors.
Innovation is increasingly shaping financial services and regulators globally are considering their responses. The FMA
wants to facilitate responsible innovation, and ensure that the regulatory regime remains relevant and agile. This is
supported by the Financial Markets Conduct Act 2013, as one of its purposes is ‘to promote innovation and flexibility in
financial markets’.
The FMA regularly engages with other regulators and industry bodies locally and internationally on these issues. The
content forms part of the FMA’s broader, ongoing effort to better understand, and share our views, on the risks and
opportunities associated with technological change and innovation.
The online content covers our view on:
Initial Coin Offers:
ICOs are used by businesses and individuals to raise funds from investors online. Investors receive digital tokens that
have certain rights.
The FMA’s view is that the specific characteristics and economic substance of an ICO determine if it’s a financial
product – if it is regulated, and if so how.
The FMA strongly encourages any businesses considering making an offer through an ICO to approach us early during their
development phase.
Cryptocurrency services:
Cryptocurrency services are businesses and individuals offering services such as cryptocurrency exchanges, wallets and
broking.
The FMA’s paper sets out the legal obligations for such providers:
• must be a member of a dispute resolution scheme
• must be on the Financial Services Providers Register
• must comply with fair dealing provisions in the Financial Markets Conduct Act
Investor resources on cryptocurrencies:
Investors must understand the risks involved with cryptocurrencies and associated services before they invest.
Most online exchanges are unregulated and operate exclusively online, with no connection to New Zealand. This means it
is hard to find out who is offering, exchanging, buying or selling. It also makes it unlikely investors will recover
their money if things go wrong.
Using cryptocurrencies may make investors a target for scammers.
Consumers need to be aware that cryptocurrencies are volatile, their value can change quickly and they aren’t widely
accepted in the same way as legal tender. The currency held in digital wallets is at risk of being stolen, just like a
real wallet.
See the ways to invest content on FMA’s website before investing in cryptocurrencies.
Ends