New Zealand's innovation agency has published an opportunity report on blockchain and distributed ledger technology (DLT) that picks out blockchain-based digital identities as way for the country to demonstrate expertise in the sector.
Callaghan Innovation is a "crown entity" in New Zealand, meaning that it is an independent agency commissioned by the government. Its specific role is to help make the country's businesses more forward-thinking. The agency networks with government partners, research institutes, and other stakeholders, with the goal of increasing business investment in research, development, and, of course, emerging technologies.
The Good News
With technology New Zealand's third-largest export sector, the report, titled "Distributed Ledgers and Blockchains Opportunities for Aotearoa New Zealand," focuses on what blockchain could offer the country's economy. To produce the report, lead author Joshua Vial interviewed over 50 blockchain entrepreneurs, investors, government officials, academics, and international experts.
New Zealand's legislation, the report says, is "largely adequate" for the new industry. Even better, unlike other regions, no regulatory changes have been necessary to accommodate the emerging sector of cryptocurrency and blockchain. For instance, the Financial Markets Conduct Act 2013 regulates exchanges and ICOs "appropriately" without curbing innovation. And the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 is already "sufficient" to cover both exchanges and token issuers.
Like France, and other countries, New Zealand's Inland Revenue treats cryptocurrencies as property for tax purposes – though the report qualifies that, given international regulatory responses, the area will "require constant attention."
The opportunities presented in the report include high-paying technology jobs, high-value exports, the facility to attract high-growth companies and talent, an increase in access to growth capital, and the knock-on effect of being a catalyst for other sectors. The report also points to "significant" avenues of innovation for banking and financial services, the media industry, and public services, as well as the benefits for international economies, particularly developing ones.
The opportunities noted, however, lead to a number of considerations for New Zealand, for both the private and public sectors.
These include the need to "unblock access" to banking services for blockchain companies and to promote New Zealand as being blockchain friendly. There is a need to develop a cross-agency blockchain working group, a research center for "decentralized computing," and a blockchain financial crime prevention forum. Furthermore, the report recommends that the Financial Markets Authority create clearer guidelines for companies to launch security tokens, stating:
"New Zealand is well positioned to strike a balance between consumer protection and ease of doing business. If New Zealand were to become the go-to jurisdiction for launching quality security tokens, we could see a rapid influx of capital and talent to the country."
The report also points to New Zealand's early adoption of "electronic funds transfer at point of sale" (EFTPOS). It says the country could now be a world leader in the adoption of "digital-identity protocols," if it were to prioritise its adoption as well as digital inclusion. By doing so, New Zealand could increase its value proposition "as a jurisdiction in which to test and launch distributed ledger technologies." The report says:
"Widespread digital identity adoption and digital service access for all New Zealanders would help to unlock the full potential of blockchain and distributed ledgers."
It's not unusual for a country to look to prioritise areas where it could attract international interest. Many other countries have aspirations to lead in blockchain and cryptocurrencies, examples are France and Malta, respectively. Notable though, is New Zealand's choice of blockchain-based digital identities as a way to demonstrate the country's DLT proficiency.