New
Zealand’s financial markets watchdog wants to hear from the industry about how tokenization
might reshape domestic markets, launching a consultation that could influence
future rules for blockchain-based securities.
“Do you
think the current law helps or hinders domestic tokenization activity, and
why?”. This is one of the questions posed to industry representatives
regarding the growing trend among businesses and investors to move assets onto
the chain, ranging from stocks and precious metals to real estate.
The
Financial Markets Authority (FMA)
released a discussion paper asking market participants to weigh in on
opportunities and barriers for tokenized products. The regulator is
particularly interested in whether existing laws help or hinder companies
looking to offer digital versions of traditional investments.
Liam Mason, FMA General Counsel
“The
pace of technological development is rapid and tokenization , like other
emerging technologies, has the potential to influence the development of New
Zealand financial services,” said FMA General Counsel Liam Mason.
The
consultation comes as several businesses have approached the FMA this year
about tokenization projects spanning industries from mining and forestry to
real estate and carbon credits. Despite growing interest, the regulator notes
that few firms have actually launched tokenized investment products for
consumers.
In other
economies, tokenization is advancing rapidly, with Robinhood
serving as a prime example. The company is putting strong emphasis on
tokenized stocks. Vlad Tenev, the company’s CEO, called tokenization “the
biggest innovation in capital markets in well over a decade.”
New Products, Old Laws
Tokenization
involves creating digital representations of assets on blockchain networks.
Examples overseas include tokenized bonds, real estate fractions, and managed
fund units that can trade around the clock on digital platforms.
New
Zealand’s technology-neutral financial laws theoretically cover these products,
but the FMA acknowledges the fit isn’t always clear. The regulator can grant
exemptions or designations to tailor rules for new business models, though this
process creates uncertainty for startups.
Current
rules create some odd gaps. Virtual asset trading platforms that hold client
funds face fewer protections than traditional share trading platforms, since
most cryptocurrencies don’t qualify as “financial advice products”
under existing definitions.
Projections
for real-world asset (RWA) tokenization are significant, with estimates
pointing to an expansion from $0.6 trillion in 2025 to $18.9 trillion by 2033.
Even a small share of global equity trading being transferred to tokenized
platforms could translate into substantial market volumes.
Looking for “Balance” Between
Innovation and Protection
The FMA’s
approach to tokenized assets appears bittersweet. Potential benefits include
24/7 trading, faster settlement, lower costs, and access to previously illiquid
asset classes. But the technology also introduces new risks around custody,
smart contract vulnerabilities, and regulatory uncertainty.
“We
have to balance ways to better support innovation and reduce regulatory
barriers for companies and innovative products, while, at the same time,
protecting consumers from harm,” Mason said.
The
consultation reveals growing concern about virtual asset-related harm. In the
first quarter of 2025, roughly 30% of misconduct allegations reported to the
FMA involved virtual assets. The regulator points to past failures like Cryptopia’s
2019 collapse and Dasset’s liquidation in 2023 as examples of consumer
risks.
New Zealand Looks to Other
Countries
Internationally,
jurisdictions are taking varied approaches. Singapore
has established comprehensive licensing for digital token service providers,
while Hong Kong requires specific licenses for virtual asset trading platforms.
The
UK and Australia are developing new regimes set to launch in 2026.
As for strictly
tokenized assets, the European watchdog ESMA
warned earlier this month that they could mislead investors, stressing the
need to clearly explain to clients how they differ from actual shares.
The
regulator wants feedback on whether New Zealand needs bespoke tokenization
rules or if tweaks to existing principles-based frameworks would suffice.
Questions also cover operational challenges, consumer protection measures, and
cross-border regulatory coordination.
“Having
a constructive conversation with industry enables us to respond faster and make
adjustments to rules and license conditions and seek law reform where
needed,” Mason said.
The
consultation runs until October 31, with the FMA planning to publish feedback
summaries and preliminary responses. Follow-up actions could include guidance
documents, licensing pathway clarifications, exemptions, or law reform
recommendations to the government.
New
Zealand’s financial markets watchdog wants to hear from the industry about how tokenization
might reshape domestic markets, launching a consultation that could influence
future rules for blockchain-based securities.
“Do you
think the current law helps or hinders domestic tokenization activity, and
why?”. This is one of the questions posed to industry representatives
regarding the growing trend among businesses and investors to move assets onto
the chain, ranging from stocks and precious metals to real estate.
The
Financial Markets Authority (FMA)
released a discussion paper asking market participants to weigh in on
opportunities and barriers for tokenized products. The regulator is
particularly interested in whether existing laws help or hinder companies
looking to offer digital versions of traditional investments.
Liam Mason, FMA General Counsel
“The
pace of technological development is rapid and tokenization , like other
emerging technologies, has the potential to influence the development of New
Zealand financial services,” said FMA General Counsel Liam Mason.
The
consultation comes as several businesses have approached the FMA this year
about tokenization projects spanning industries from mining and forestry to
real estate and carbon credits. Despite growing interest, the regulator notes
that few firms have actually launched tokenized investment products for
consumers.
In other
economies, tokenization is advancing rapidly, with Robinhood
serving as a prime example. The company is putting strong emphasis on
tokenized stocks. Vlad Tenev, the company’s CEO, called tokenization “the
biggest innovation in capital markets in well over a decade.”
New Products, Old Laws
Tokenization
involves creating digital representations of assets on blockchain networks.
Examples overseas include tokenized bonds, real estate fractions, and managed
fund units that can trade around the clock on digital platforms.
New
Zealand’s technology-neutral financial laws theoretically cover these products,
but the FMA acknowledges the fit isn’t always clear. The regulator can grant
exemptions or designations to tailor rules for new business models, though this
process creates uncertainty for startups.
Current
rules create some odd gaps. Virtual asset trading platforms that hold client
funds face fewer protections than traditional share trading platforms, since
most cryptocurrencies don’t qualify as “financial advice products”
under existing definitions.
Projections
for real-world asset (RWA) tokenization are significant, with estimates
pointing to an expansion from $0.6 trillion in 2025 to $18.9 trillion by 2033.
Even a small share of global equity trading being transferred to tokenized
platforms could translate into substantial market volumes.
Looking for “Balance” Between
Innovation and Protection
The FMA’s
approach to tokenized assets appears bittersweet. Potential benefits include
24/7 trading, faster settlement, lower costs, and access to previously illiquid
asset classes. But the technology also introduces new risks around custody,
smart contract vulnerabilities, and regulatory uncertainty.
“We
have to balance ways to better support innovation and reduce regulatory
barriers for companies and innovative products, while, at the same time,
protecting consumers from harm,” Mason said.
The
consultation reveals growing concern about virtual asset-related harm. In the
first quarter of 2025, roughly 30% of misconduct allegations reported to the
FMA involved virtual assets. The regulator points to past failures like Cryptopia’s
2019 collapse and Dasset’s liquidation in 2023 as examples of consumer
risks.
New Zealand Looks to Other
Countries
Internationally,
jurisdictions are taking varied approaches. Singapore
has established comprehensive licensing for digital token service providers,
while Hong Kong requires specific licenses for virtual asset trading platforms.
The
UK and Australia are developing new regimes set to launch in 2026.
As for strictly
tokenized assets, the European watchdog ESMA
warned earlier this month that they could mislead investors, stressing the
need to clearly explain to clients how they differ from actual shares.
The
regulator wants feedback on whether New Zealand needs bespoke tokenization
rules or if tweaks to existing principles-based frameworks would suffice.
Questions also cover operational challenges, consumer protection measures, and
cross-border regulatory coordination.
“Having
a constructive conversation with industry enables us to respond faster and make
adjustments to rules and license conditions and seek law reform where
needed,” Mason said.
The
consultation runs until October 31, with the FMA planning to publish feedback
summaries and preliminary responses. Follow-up actions could include guidance
documents, licensing pathway clarifications, exemptions, or law reform
recommendations to the government.
