Jul 1, 2025

Date 01/07/2025 Cryptocurrencies have become increasingly popular over the past decade – with some proponents believing they have the potential to revolutionise the world’s financial system. Crypto can be appealing to a lot of people, but what are some of the things to consider before investing? It’s a high risk, speculative investment and prices can go up and down very quickly. You should be prepared to lose all your money invested.  Bitcoin (BTC) Binance Coin (BNB) Bitcoin, the original cryptocurrency is by far the most dominant, with the total value of bitcoins circulating now measured in the trillions of dollars. But there is generally no underlying physical asset that determines the value of a cryptocurrency. This means that its value is largely driven by speculation and what people will pay for it. Cryptocurrencies are a type of asset that exists in digital form and can be managed, stored or transferred typically using a distributed ledger (such as a blockchain). Encryption technology is used to control the amount of currency issued and to record ownership and payments. Because it is decentralised by nature, there’s no control by a single entity such as a government, bank or financial institution - there are no restrictions on who can issue them. For some, cryptocurrencies are attractive because they give access to financial services without the need to rely on traditional financial institutions such as banks. Crypto also offers the possibility of faster transactions and lower fees compared to conventional financial transactions. Many are attracted to crypto investing by the possibility of high returns as they increase in value. Early adopters of cryptocurrencies like Bitcoin have witnessed substantial gains, drawing more investors to explore such digital assets. So while using crypto to pay for everyday goods and services is still limited, cryptocurrencies are gaining acceptance as investments and payment options by financial institutions and businesses. Crypto isn’t specifically regulated here in New Zealand, and international laws and regulations vary widely from country to country. While there are some basic consumer protections when you put your money into most other financial products – this may not be the case for crypto investments. Crypto investing tips If you want to buy, sell or trade cryptocurrencies, use platforms or other service providers that are registered on  New Zealand’s Financial Service Providers Register (FSPR) . Dealing with an entity registered on the FSPR will, in most cases, gives you access to an independent Dispute Resolution Scheme (DRS) where you can take complaints if something goes wrong. These entities may also be required to comply with our anti-money laundering and counter terrorism financing laws. Be careful with investments that are promoted on social media by influencers or celebrities – they are often paid to promote high risk investments and may not have credentials to discuss such investments. Many advertisements or news stories featuring celebrities are fake and used to direct people to scam websites. Criminals may exploit the popularity of cryptocurrencies to promote scam investments. Funds lost in crypto scams are often not recovered. The FMA’s warning and alerts page has details of some of the latest scams.  Before you invest in cryptocurrencies, do some research to understand the investment, the risks associated with it, your financial objectives and your risk tolerance. If you don’t understand an investment, it’s best to walk away.  Understanding the risks Many of the big overseas crypto exchanges are unregulated and they operate exclusively online, with no connection to New Zealand. This makes it hard to find out exactly who is offering, exchanging, buying or selling crypto. It can also make it difficult for you to contact the exchange or make a complaint and it is unlikely you will get your money back if things go wrong. Crypto and scams Around a quarter of the warnings published last year by the FMA had a link to crypto. Scammers like using crypto as the transactions move fast and are irreversible, making it harder to trace. It also allows them to hide their identities and activities. The most common crypto scams are related to fake online crypto investment platforms. These online platforms offer different types of investments in crypto and returns that are often unrealistically high. Once someone invests with the platform, they are shown a fake dashboard with the “profits” they earned, but these are fake. These fake profits are usually shown to encourage an investor to put in even bigger sums of money. When the investor then wants to withdraw funds, they are asked to first pay advance fees to cover taxes or commission. Even when these fees are paid, the investor cannot withdraw their funds. Investors used to come across these fake online crypto investment platforms by searching online for investment opportunities, but it is now common to be introduced to these platforms via social media. This could come from simply clicking on an advertisement, or being invited to invest after meeting a friend or potential love interest online. So although cryptocurrencies haven’t yet fully transformed the global financial system, they remain a popular investment option for many New Zealand investors. And opting for a platform that is registered here in New Zealand is one great way to improve the security of these investments.