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Speaker 1: Investing and involves a risk you might lose the money

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Speaker 1: you start with. We recommend talking to a licensed financial advisor.

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Speaker 1: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 1: Everything you're about to see and here is current at

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Speaker 1: the time of record.

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Speaker 2: It's a special week on Shared Lunch to mark the

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Speaker 2: recent launch of Shares is Crypto. We're going to be

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Speaker 2: diving into five conversations all about crypto, from how it's

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Speaker 2: evolving to what investors need to know in twenty twenty

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Speaker 2: five and beyond. Just a note though some of these

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Speaker 2: episodes were recorded earlier in the year, so some market

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Speaker 2: prices and movements may have changed. In this third episode,

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Speaker 2: I talked to Blockchain New Zealand chair Jeremy Miuer and

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Speaker 2: I ask him what's the state of play with crypto

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Speaker 2: and Artiro. Welcome, Jeremy, Great to have you on the

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Speaker 2: program again.

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Speaker 3: Hi, hele them. It's nice to be here.

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Speaker 2: Last time we spoke, it was about eighteen months ago,

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Speaker 2: and that was when the US regulator, the Security Exchange Commission,

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Speaker 2: had approved bitcoin exchange traded funds. Now quite a bit

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Speaker 2: has happened since then. I just be keen on your

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Speaker 2: view on how things have progressed in terms of the

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Speaker 2: acceptance and the legitimizing of crypto.

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Speaker 3: Yeah, lock Hellen. A lot has happened in the last

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Speaker 3: twelve months, in particular in the United States, where there

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Speaker 3: has been a bit of a change in a big

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Speaker 3: change in sort of regulatory attitude. Under President Trump. There

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Speaker 3: has obviously been a direction to these Securities and Exchange

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Speaker 3: Commission to be a more positive regulator rather than a

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Speaker 3: negative regulator in some respects. There's also been an unblocking

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Speaker 3: of proposals for legislative reform at the Congress and Senate

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Speaker 3: levels in the United States. So things are happening in

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Speaker 3: that from a regulatory perspective, makes people a little sort

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Speaker 3: of more easy about investing. I think in New Zealand

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Speaker 3: we continue to soldier on. There's definitely interest from the

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Speaker 3: regulators and to a degree from from parliament. Nothing's major,

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Speaker 3: major is on the on the table at the moment,

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Speaker 3: but I think that, together with the core bitcoin price

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Speaker 3: continuing to go up, has obviously spurred a lot of

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Speaker 3: interest in the in the in the area.

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Speaker 2: Isn't it that bitcoin? It was the first, I think,

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Speaker 2: first cryptocrat, so you can correct me if I'm wrong.

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Speaker 2: But aren't most of the others more, whether you call

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Speaker 2: them a coin or a token, don't they use the

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Speaker 2: blockchain that So in other words, you're sort of pigged

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Speaker 2: backing off Bitcoin. Is that how it works?

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Speaker 3: Yeah, well, in a way, yes, or at least the

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Speaker 3: idea in the technology. Bitcoin was not the first sort

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Speaker 3: of attempt at electronic money or digital currencies, but it

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Speaker 3: was the first to use the particular underlying technology of

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Speaker 3: a blockchain. That technology has then spun out to create

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Speaker 3: other coins and tokens, although they do work differently and

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Speaker 3: they do mean different things. So ethor ethereum, for example,

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Speaker 3: is it's kind of the fuel and the petrol and

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Speaker 3: the underlying sort of coin for a whole system of contracts,

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Speaker 3: decentralized applications. It's a universe of programming that uses ethereum

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Speaker 3: to make payments and do other things. So the riz

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Speaker 3: and fall of ethereum is sort of inherently linked to

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Speaker 3: what people are doing within that wider sort of ethereum

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Speaker 3: ecosystem or network, whereas Bitcoin kind of just stands alone,

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Speaker 3: not entirely, but stands in itself as a store of

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Speaker 3: value and potential sort of payment coin. Whereas all of

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Speaker 3: the other coins are different in their own rights. There

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Speaker 3: are some that are just pure copy and some things

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Speaker 3: are just sort of copies but with iterations or designed

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Speaker 3: to be a little bit faster or to provide an

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Speaker 3: extra layer of functionality, but they can be quite different.

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Speaker 2: Looking back home in New Zealand, then, in terms of regulation,

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Speaker 2: you mentioned before that things were kind of soldiering on.

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Speaker 2: I think as a word you used, does that mean

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Speaker 2: that we probably won't see regulation anytime soon or what's

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Speaker 2: your view.

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Speaker 3: What we are finding is that the rest of the

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Speaker 3: world is starting to move in terms of actually passing legislation.

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Speaker 3: Some places like Europe have quite detailed legislative and regulatory

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Speaker 3: regimes already in place. The US was a bit stored,

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Speaker 3: but it's now moving quickly. Australia is moving, although not

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Speaker 3: necessarily quickly if you talk to people there, we're kind

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Speaker 3: of still a few steps back in that we have interest.

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Speaker 3: The Financial Markets Authority is doing some consultation around organization

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Speaker 3: and other sort of adjacent parts of the technology, but

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Speaker 3: we don't necessarily necessarily have a thought through legislative framework

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Speaker 3: for cryptocurrencies or digital assets yet.

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Speaker 2: The Reserve Bank too has talked about introducing a digital currency.

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Speaker 2: I know they've done sort of review work on that

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Speaker 2: sort of thing. Is that something that's more likely sooner

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Speaker 2: than later, or whether it be a stable coin or

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Speaker 2: something else.

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Speaker 3: Yeah, So the Reserve Bank has a project which it

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Speaker 3: has under the label of digital cash generally, and one

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Speaker 3: outcome of that could be a central bank digital currency,

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Speaker 3: so a form of digital money issued by the government.

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Speaker 3: There is already a lot of electronic money that circulates

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Speaker 3: that we're all familiar with, but a lot of that

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Speaker 3: is actually mediated by banks or other people. So when

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Speaker 3: you move money from your bank to someone else's bank,

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Speaker 3: you're really moving rights against your bank to rights against

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Speaker 3: their bank, whereas digital money would be more like cash

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Speaker 3: in the sense that it is directly issued by the

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Speaker 3: government and is directly legal tender and not subject to

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Speaker 3: an intermediary potentially going broke. So that project is underway,

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Speaker 3: it's not moving at a fast clip. They hadn't. The

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Speaker 3: timetable is more that at some point between here and

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Speaker 3: twenty thirty they would hope to get some pilots up

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Speaker 3: and running and possibly get something actually out there. But

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Speaker 3: there are a lot of issues, and there is also

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Speaker 3: a lot of sort of community interest and pushback from

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Speaker 3: largely from people who don't want to see physical cash disappear,

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Speaker 3: which the RBNZ has said is not their intention and

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Speaker 3: not what they're not what they're using this project to explore.

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Speaker 3: So it's really about bringing people along on the journey,

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Speaker 3: so to speak.

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Speaker 2: Yeah, thinking of people in more of an acceptance or

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Speaker 2: you know, even the crypto curious, which I think there's

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Speaker 2: a lot of people are, what would you say that

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Speaker 2: they need to be thinking about given that access to cryptocurrencies,

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Speaker 2: particularly with something like the Cheesy's offering which is probably

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Speaker 2: less complicated, and a lot of education and information that

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Speaker 2: goes with that, what sort of things do you think

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Speaker 2: the crypto curious need to be heeding with this? Because

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Speaker 2: it's still an unregulated asset, isn't it.

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Speaker 3: Yeah, in part it is, and it's certainly not regulated

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Speaker 3: in the same way and to the same extent that

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Speaker 3: buying shares that are listed on stock markets are regulated.

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Speaker 3: And it is largely in terms of an investment. It

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Speaker 3: is largely around that lack of regulated marketplaces that where

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Speaker 3: there is some risk of both sort of bad behaviors

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Speaker 3: by people sort of pushing particular coins or otherwise or

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Speaker 3: just a lack of technology and security, which has been

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Speaker 3: a bit of a bugbear of some of the exchanges

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Speaker 3: in the past. Those things are evolving in both cases,

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Speaker 3: but for the crypto curious, I think it's still a

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Speaker 3: great opportunity to understand the technology which is part of

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Speaker 3: the digital world that we live in and that we're

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Speaker 3: evolving further into. As an investment, it's like any investment

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Speaker 3: one where you need to do your research and understand

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Speaker 3: what you're getting into. There is a fundamental volatility in

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Speaker 3: a lot of crypto assets that reflects that it's not

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Speaker 3: an evolved market to the way that say the share

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Speaker 3: market is. The share market has a lot of a

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Speaker 3: lot of institutional players and rules reasons which do sort

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Speaker 3: of chip the edge off a lot of that volatility,

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Speaker 3: but that's still there in crypto markets. So you can't

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Speaker 3: put money into these markets and expect that it will

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Speaker 3: go up automatically or forever. It may equally go down,

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Speaker 3: and it may go up and down faster than investments

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Speaker 3: in more traditional markets.

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Speaker 2: Now, Jeremy, I know you're not a tax lawyer, but

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Speaker 2: it is always good to remind people about what sort

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Speaker 2: of treatment crypto has in terms of tax.

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Speaker 3: Yeah, as you say, I'm not a tax lawyer, but

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Speaker 3: I'm very lucky in that I get to spend a

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Speaker 3: lot of time with tax lawyers in my job. So

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Speaker 3: you the fundamental taxation point to understand with buying and

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Speaker 3: selling crypto generally, and you know, I use crypto in

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Speaker 3: the widest sense, but as we've said, it's actually it's

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Speaker 3: just technology. So you really have to look at exactly

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Speaker 3: what you're buying. But let's say most things like bitcoin

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Speaker 3: is that it's unlike a share in that you can't

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Speaker 3: buy it with the expectation that it's going to pay

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Speaker 3: you a dividend. And that means from a tax perspective

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Speaker 3: that from the IDEs perspective, you may well be buying

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Speaker 3: it with the intention of one day selling it because

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Speaker 3: there's not really anything else to do with it, even

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Speaker 3: if you are buying things with it or transacting with it,

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Speaker 3: that you're really selling it. So because it's kind of

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Speaker 3: an item, it's not actually money. So what that means

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Speaker 3: is that you may be fully liable for tax on

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Speaker 3: any profits that you make when you sell bitcoin, say

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Speaker 3: in a way that you may not be if you

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Speaker 3: buy shares, where if you buy shares and hold them

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Speaker 3: on capital account, you make a capital gain. You didn't

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Speaker 3: buy them with the intention of reselling them. You may

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Speaker 3: have bought them because you just want to see them

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Speaker 3: grow and then maybe earn some dividends along the way.

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Speaker 3: It's kind of the same argument that people would make

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Speaker 3: with rental properties and things like that. You just can't

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Speaker 3: really make that argument with a lot of crypto assets. Possibly,

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Speaker 3: if you are buying them with the intention of staking

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Speaker 3: them or earning a return, you may be able to

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Speaker 3: make a different argument. Obviously you don't make a profit,

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Speaker 3: then you don't have to pay any.

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Speaker 2: Tax, do you, I mean, anything else you'd like to add,

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Speaker 2: Just be interested in any observations you've had in the

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Speaker 2: last year or so which you think are pertinent to

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Speaker 2: this conversation.

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Speaker 3: One of the issues with crypto to date has just

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Speaker 3: been the opacity, impenetrability, and difficulty of both acquiring assets

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Speaker 3: keeping them. If you've you know, with the various pass

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Speaker 3: codes and private keys and other information you need, it

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Speaker 3: has not been user friendly. So ultimately the technology to

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Speaker 3: get wider acceptance and usage has to be made more

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Speaker 3: user friendly, so you know, ways like share these hopefully

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Speaker 3: will help with adoption. And make it easier for people

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Speaker 3: to if they wish to get some exposure, get exposed

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Speaker 3: in a more straightforward way.

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Speaker 2: There is that argument, though, Jeremy, that the complications almost

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Speaker 2: like a dark art if you like, that's kind of

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Speaker 2: deliberate because it does keep it to fewer people.

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Speaker 3: What I've seen and over the history has been the

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Speaker 3: initial adopters and the very early community were almost entirely

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Speaker 3: tech people. Then what you've added on top of that

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Speaker 3: is a layer of over the last several years, quite

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Speaker 3: extreme institutional interest and a few sort of dabblers around

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Speaker 3: the side. What we haven't really had is a very

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Speaker 3: retail focused group of people or businesses, or at least

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Speaker 3: that people have tried, have tried, but they haven't quite

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Speaker 3: now it yet, And I think that's still coming. So

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Speaker 3: I don't think it's intentional. I think it's it reflects

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Speaker 3: the makeup of the people who have been dry having

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Speaker 3: it from here.

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Speaker 2: So how do you think those early adopters feel about

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Speaker 2: it going mainstream. I'm not sure it is mainstream. There's

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Speaker 2: a lot of talk about crypto being mainstream, but I

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Speaker 2: think it's probably heading that way.

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Speaker 3: Ah. Look, I'm sure some of them probably think it's

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Speaker 3: it's the end of end of a dream, or it's

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Speaker 3: a divergence from the true path, and whether or not

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Speaker 3: they're right, time will Time will tell. Crypto is generally

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