Reserve Bank of New Zealand taking ‘cautious approach to crypto,’ watching global developments

New Zealand still isn’t ready to commit to crypto regulation, the Reserve Bank of New Zealand said Friday.

It did, however, call for “increased vigilance” following a submission period that closed in April. The Reserve Bank received 50 submissions — from Ripple to Grant Thornton.

Following a period of submissions, the Bank published a paper to further detail its thinking on digital assets — including central bank digital currencies (CBDCs). According to the Atlantic Council’s stablecoin tracker, roughly 130 countries are exploring a CBDC.

In 2021, the bank announced that it was exploring a CBDC, but the paper reiterates that the bank has “not made any decision about the need for one.” 

On the topic of regulation, the Bank noted that submitters had suggested that crypto startups be allowed to “grow into regulation.” This could allow for “regulatory sandboxes” and a “tiered compliance approach.” The suggestions, though, don’t mean that New Zealand will pursue such a regulatory structure. 

“Many submitters also said that RBNZ should err on the side of caution when it comes to regulation. This is because the sector’s growth trajectory remains uncertain, and regulatory developments are ongoing globally,” the paper said. 

The submitters stressed that regulations must “remain sufficiently open and flexible so that they do not stifle innovation, and that regulators minimize unintended consequences from regulatory measures.” 

The bank, in its response, says that it will continue to take a “cautious approach” as it watches global developments. There are “real advantages to harmonizing crypto asset regulation,” which could help the Bank decide on the “optimal regulatory design.”

“The submissions reinforce our view that there are significant risks and opportunities from stablecoins and other private money innovations, but also significant uncertainties about how the sector will develop and where the optimal balance will lie. We agree that caution is needed, which also reinforces the need for enhanced data and monitoring to build understanding,” Reserve Bank of New Zealand’s Ian Woolford said. 

Despite the Reserve Bank’s caution on crypto regulation, Binance expanded into New Zealand in September 2022 after successfully registering with the business ministry.

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