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You have likely heard of Bitcoin or Ethereum as emerging forms of cryptocurrency, gaining popularity globally. New Zealand is no different, with more crypto exchange companies establishing themselves as time goes on. You may have an interest in what it can do for your business, whether that be as an:

  • investment opportunity; or
  • alternative method of payment for your customers.

Regulation in this area is largely underdeveloped, but if you intend to deal with cryptocurrency in your business, you need to know what rules apply to you. This article will explain how cryptocurrency works and its legal status in NZ.

What Is Cryptocurrency?

Cryptocurrency refers to digital tokens of monetary value that you can purchase online, through exchange companies or initial coin offers (ICOs). They do not exist physically, but on some exchanges, you can transfer the value of your cryptocurrency for New Zealand money.

For example, at the time of writing, one Bitcoin is equal to NZD $43,807.

As the field itself is still developing, some of the terminologies can be difficult to understand. Alternative names for cryptocurrency include:

  • cryptographic assets or ‘crypto assets’ (this is the term IRD uses);
  • digital coins or tokens;
  • virtual assets;
  • digital financial assets; and
  • virtual currencies.

The word itself is derived from a combination of ‘cryptography’ and ‘currency’. This refers to the fact that cryptocurrencies are encrypted, and you store them in a digital wallet that only you have the key to. You can use this as currency to purchase goods and services from those that accept it.

You may use cryptocurrency for a variety of reasons, including:

  • making a profit if it increases in value;
  • paying for goods or services without going through a banking system;
  • taking advantage of lower transaction fees (or none at all) when paying for things online, where such fees may exist with traditional banks or other online payment options; or
  • investing in a business or a person raising money through cryptocurrencies using an ICO.

How Does Cryptocurrency Work in New Zealand?

For tax purposes, IRD treats cryptocurrencies as property and does not see them as legal tender. This means that the government does classify it as money that businesses must accept as payment. You would own cryptocurrency like you would own shares in a company.

It can be challenging for governments to regulate cryptocurrencies because their storage system’s nature makes it difficult to ascertain who owns what, unless there is already some identifying information. While regulations will become more concrete as time goes on, currently the law in this area is still developing.

However, existing NZ law, such as anti-money laundering law, will apply to you if you offer cryptocurrency as a ‘financial service’. These activities include offering:

  • exchanges: offering transfer of NZ dollars for cryptocurrency;
  • wallets: providing a crypto storage service on behalf of others;
  • broking: arranging crypto asset transactions; and
  • ICOs.

If you are interested in becoming a cryptocurrency provider or exchange company, you should get legal advice regarding your obligations. If you offer a financial service, you cannot mislead other parties about your services or make deceptive or unsubstantiated statements.

IRD is increasing its reporting requirements for cryptocurrency owners, and following up on investor details that they receive from NZ exchange companies. This means that there will be greater scrutiny in this area as time goes on.

What Do I Need to Know if My Business Deals With Cryptocurrency?

The NZ Financial Markets Authority (FMA) has three warnings for those who have an interest in investing in cryptocurrencies:

  1. they are high risk and volatile. This means that the value of your cryptocurrency can rise and fall very quickly;
  2. they are not regulated in NZ; and
  3. both cryptocurrencies and crypto exchanges, as well as the people that use them, are often targets of hacking, online fraud, and scams.

People can indeed make a great profit operating in cryptocurrency, but the potential for significant losses is also very high. If you want to invest in cryptocurrency as a source of income for your business, be sure that you fully understand the risks.

If you want customers to have the option to pay for your goods or services using a cryptocurrency, this still counts as receiving income. So, taxes will apply to that transaction. You have to record any crypto asset activity on your tax returns if you receive an income from it. Note that:

  • these cryptocurrency transactions are barter transactions;
  • on your tax return, you need to calculate the equivalent value of the crypto asset in NZ dollars;
  • you should keep records of any crypto asset activity in your business, including how you acquired it and its value; and
  • if you do not report the income you receive from cryptocurrency transactions, you could face severe tax penalties.

Key Takeaways

It remains to be seen if cryptocurrency will develop as a legitimate and widely available payment method for goods or services. You may decide that you want to invest in crypto assets now as it is still developing, but make sure you are aware of the risks. If you would like more information or further guidance around cryptocurrencies, contact LegalVision’s New Zealand IT lawyers on 0800 005 570 or fill out the form on this page.


What is cryptocurrency?

Cryptocurrency is a digital representation of value, that you can use to pay for goods or services if the other party accepts it. It is encrypted, and you store it in a digital wallet that only you have access to.

Is investing in cryptocurrency legal in NZ?

Investing in cryptocurrency is legal in NZ, but note that regulations in this area are sparse, so if something goes wrong, you may have difficulty getting some kind of legal remedy. If you offer crypto services, you will be subject to existing NZ law.

Can my business use cryptocurrency?

You can purchase cryptocurrency and hold it as company assets for investment, or allow customers to pay you with it. These are barter transactions, and you have to pay income tax on this exchange.

Is cryptocurrency a good investment?

Cryptocurrency is highly volatile, and its value fluctuates frequently. So, depending on your circumstances, it may not be the most prudent investment. But if you are prepared and can handle the risk, it may be appropriate for you.

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