New Zealand Central Bank Dismisses Formulation of Crypto Regulatory Approach as Unnecessarily

The Reserve Bank of New Zealand (RBNZ) affirmed its support for close monitoring of stablecoins and cryptocurrencies.  The central bank is increasing the stablecoins and crypto assets monitoring as a response to the public submissions. Nonetheless, it dismissed calls to formulate crypto-specific regulatory approaches now indicating the process as intensive. 

Reserved Bank Admits Vigilance is Mandatory to Overcome Crypto Assets Risks

The Reserve Bank executive heading the money and cash department Ian Woolford revealed in the Friday, June 30 statement that increased vigilance is necessary. Nonetheless, the RBNZ director dismissed the regulatory approach as unnecessary. 

Woolford’s update featured a summary that captures submissions from 50 stakeholders stakeholder submission to a previous RBNZ paper examining cryptocurrency and decentralized finance (DeFi). The submissions feature respondents who comprised tech firm Ripple, Westpac Bank, BlockchainNZ crypto advocacy, and Bank of New Zealand. 

Uncertainties Pose Huge Hindrance to Crypto Sector Development

Woolford referenced the submissions as showing cryptos as harboring significant risks and opportunities. The respondents observed that uncertainties hinder the sector’s development, a reason for RBNZ’s attention.

The director admitted that RBNZ agrees that a cautious approach is necessary to reinforce the essence of enhancing data-based decisions in the digital ecosystem. Also, active monitoring is critical to nurture an understanding of crypto assets.

Global Harmonization in Crypto Regulation is Critical 

The stance adopted by RBNZ portrays a considered approach implemented by Australia. It portrays a seemingly monitoring of mechanisms deployed by other jurisdictions in regulating crypto assets. Playing the waiting card will enable RBNZ to build upon the templates of other jurisdictions before formulating its independent move. 

Woolford observed that global harmonization is critical to guarantee effective regulation of digital assets. He admitted that best practices in the crypto assets industry would become transparent as the majority of overseas regimes implement their pending legislation. 

Improve Vigilance to Protect Spillover of Crypto Vulnerabilities in Mainstream Finance

RBNZ’s stance prioritizes active vigilance to avoid crypto assets industry vulnerabilities spilling over to the mainstream finance system. The executive called short the regulation by enforcement deployed by SEC. Instead, the central bank leans towards a participative platform by encouraging submissions to inform the formulation of legislation in the future. 

The considered approach adopted by RBNZ to prioritize vigilance over rushed legislation is justified by the mild crypto adoption. A Chainalysis publication indicated that New Zealand ranked 108 from the 146 countries that participated in the 2022 Global Crypto Adoption Index. The report indicated that New Zealand’s grassroots crypto adoption rates were below those of Austria and slightly above those of Azerbaijan. 

Formulating Crypto-Specific Regulations in Inevitable for New Zeland

Woolford’s review of New Zealand’s context illustrated that cryptocurrencies are considered a unique property form under the current laws. The country governs digital assets through various provisions enshrined under money laundering, tax, and non crypto-specific financial regulations. 

Woolford indicates that though RBNZ would heighten the vigilance, he admitted that issues emerging from today’s innovations and crypto assets barely fall neatly within the central bank’s boundaries.

Woolford believes that formulating crypto-specific laws is inevitable in the country’s pursuit of consumer and investor protections. He added that the regulatory framework becomes the catalyst for establishing a reliable yet efficient money system. 

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