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New Zealand’s financial regulator has ruled that a local currency-tied stablecoin, NZDD, isn’t a financial product, a move a local law firm says is an important step toward regulatory clarity.

The Financial Markets Authority (FMA) said on Wednesday that the new designation for the stablecoin pegged to the New Zealand dollar resulted directly from a financial technology sandbox pilot the regulator is running.

“The economic substance of the NZDD stablecoin is that it is not a debt security, as the NZDD stablecoin is not an investment, and no income, interest or other gain is paid to the NZDD stablecoin holder,” the FMA said.

Law firm pegs designation as a step in the right direction

New Zealand law firm MinterEllisonRuddWatts, which said it acted for NZDD issuer ECDD Holdings in relation to its participation in the FMA sandbox, called the new designation an important step toward regulatory certainty for stablecoins in the country.

“However, it is important to note that the designation relates to a specific product and version of a stablecoin, being the NZDD in the form described in the designation notice and does not constitute a general determination as to the regulatory treatment of all stablecoins,” the firm said.

“The designation signals a pragmatic approach by the FMA to financial innovation that is consistent with developments in comparable jurisdictions and provides a foundation from which further pathways can be developed,” it added.

Sandbox pilot to expand with new license

The FMA also announced it's planning to introduce an on-ramp or restricted license for FinTech firms as part of its sandbox pilot.

Related: New Zealand bans crypto ATMs in crackdown on criminal cash conversions

“Our financial system is changing faster than ever before. This new type of licence will support firms to get access to the market with some restrictions in place that can be removed as the firm grows,” FMA chief executive Samantha Barrass said.

A 2024 report by Web3 consumer research firm Protocol Theory estimated that nearly 50% of New Zealand’s 5.2 million population are either current crypto investors or are considering investing.

Separately, data analytics firm DataCube Research projects New Zealand’s crypto market will be worth around $254 billion.

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