New Zealand: “Stablecoins are not financial products… closer to a means of payment”

New Zealand authorities have said stablecoins pegged to the country’s currency do not qualify as financial products.

The Financial Markets Authority (FMA) said on the 11th (local time) that the stablecoin “NZDD” is not a financial product under the Financial Markets Conduct Act. NZDD is a stablecoin whose value is pegged 1-to-1 to the New Zealand dollar.

The FMA stressed that “the economic substance of a stablecoin is not a ‘debt security.’” It added that “the practical use of a stablecoin is as a means of payment or remittance,” noting that “NZDD stablecoin holders are not paid income, interest, or other benefits, and it is not an investment product.”

The FMA’s view is that stablecoins should be defined as a “means of payment.” The FMA said “stablecoins are, in substance, closer to a ‘payment mechanism,’” adding that “consumers are also likely to view them as payment products rather than investment products.” It went on to say that “classifying NZDD as a debt security could instead create consumer confusion about the product’s true nature.”

It also expressed optimism about stablecoins. The FMA said “NZDD has the potential to improve efficiency in the payments and remittance market,” explaining that this is because it “can broaden (market) competition and contribute to improved market efficiency.” It also said that “regulating (NZDD) as a debt security is unlikely to lead to greater transparency or the provision of useful information to customers.”