In a concerning development in Kiwi "crypto" news, the FMA has approved what I understand to be New Zealand's first official stablecoin in a "sandbox pilot" experiment.
I believe this advent could only be possible under a National/ACT government, not that I excuse Labour from similar accusations, and this is turning a dangerous corner because it invites scams at a time when scamming is already rampant.
What are stablecoins?
Stablecoins are a simple proxy into the Pyramid scam known widely as "crypto". The term Crypto is a shortening of crypto-currency which leans on the science of cryptography, while having little to do with the science itself, and much more to do with obfuscation of fraud by purporting to be a product of computer science. But it is no such thing, and "crypto" has (perhaps ironically) not contributed to the science of cryptography in any way.
Stablecoins have been previously tested in New Zealand in the quasi- or plainly-illegal capacity by firms such as Cryptopia. That saga did not end well, and the settlement process is ongoing at the time of writing. Scams continue to target the investors who claimed losses from that dramatic ending. Their data is likely being traded by on the dark web, because 'crypto opsec' is a bit of a meme or joke in the hacker community: these are people who willingly buy 'hardware wallets' thinking it will make them more secure than just reading a book about basic key management practices.
I can see a number of problems with the FMA approving this, not least of all the plain illegality of Pyramid schemes misrepresented as 'P2P digital currency', which is a basic disguise for these scams as interest bearing investment schemes. This puts the FMA into a conflicted position, approving something which would fall foul of the Fair Trading Act and invite the Commerce Commission's involvement.
However, the sheer volume of misinformation surrounding "crypto" misleads people into excusing things like Bitcoin from prosecution under the Act. It is difficult to communicate anything unutopian about "crypto" through all the uninformed noise AI generates lauding it.
New Zealand Digital Dollar
As I understand it, the proposed stablecoin is titled the New Zealand Digital Dollar (NZDD) and is a creation of EasyCrypto. Who asked for this?
The paucity of consumer demand for these financial products raises suspicion, as to why they are being gifted regulatory favours. There is no innovation to speak of here, unless the innovation is scamming people at larger scale, and with more ease. The demand itself is largely synthetic with marketing hype creating it out of thin air.
Selling Fake Internet money is probably a tall order, I don't spite the marketers of this but do question their level of competency in the domain of computer science and finance, and how well informed they are on the subject of cryptography: the cryptographers and hackers I know all loathe "crypto" for resting on their laurels to scam vulnerable people.
Conclusion
This is not good. It the kind of thing that can only come out of an anti-regulation political environment that is ambivalent towards scammers. It also politically positions New Zealand closer to the Trump administration, to Russia, and the woeful crypto scams which surround them both.
Rejection of corporate 'script' not dissimilar to 'crypto' as we know it today, was a not insignficant part of the American revolution, and to see NZ repeat some of history's greatest mistakes makes for a sad epoch in New Zealand political history.
Todays announcement by the FMA also opens Kiwis up to scams like fractional property investments, but those are outside the scope of the writing I do on this website.
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