Several local managed funds and KiwiSaver providers now offer crypto investment. Photo / Getty Images
Online exclusive
In late 2021, as the Omicron variant of Covid-19 started to spread, I made my first investments in cryptocurrencies, buying Bitcoin, Ethereum and a handful of other tokens via the largest New Zealand-owned crypto platform, Easy Crypto.
It was nearly the peak of a bull run for the
crypto market, with a crash coming early in the new year that would usher in the crypto winter, a two-year period that saw coin prices depressed and the failure of numerous cryptocurrency platforms, most spectacularly the FTX exchange run by Sam Bankman-Fried.
It was only in November 2024 that my crypto portfolio, which I’d left untouched for three years, was finally in the black again. I had Donald Trump to thank for that. The price of a single Bitcoin reached US$100,000 for the first time as then President-elect Trump hinted at light-touch regulation for the crypto sector and even the development of a US strategic reserve consisting of Bitcoin, the world’s largest cryptocurrency.
The debut of Bitcoin exchange-traded funds in 2024 also made it easier for investors to put money into the leading cryptocurrency without having to use crypto exchanges or maintain digital wallets.
Retiring on Bitcoin
Several local managed funds and KiwiSaver providers now offer crypto investment, including Kōura Wealth’s Bitcoin Fund which has had a 61% return since inception in May 2022 and charges a 1.10% management fee. The crypto sector remains highly volatile with major swings in token value.
The recent insolvency of Dasset, a New Zealand crypto-asset exchange, highlights the risks involved when crypto ventures fail. Crypto remains largely unregulated in most countries, a situation that was set to change in the US with the Security and Exchange Commission gearing up to bring crypto trading in line with other types of financial activities.
However, on his return to the White House, Trump assembled a cryptocurrency working group to come up with new digital asset regulations. He ordered banks to refrain from cutting off banking services to crypto companies and ruled out the introduction of a US central bank digital currency, which could potentially compete with the likes of Bitcoin and Ethereum. A shake-up at the SEC (US Securities and Exchange Commission) is already seeing it rescind various policies viewed unfavourably by the crypto sector as holding it back.
Despite the risk and volatility, younger Kiwi investors in particular are attracted by potentially high returns. A survey commissioned last year by New Zealand-owned non-custodial crypto exchange, Easy Crypto, found that nearly 50% of New Zealanders had crypto investments or were considering investing in the future.
“This shift is driven by a growing discontent with traditional financial systems, with one in three investors considering crypto due to its potential to reduce the profits of banks and large corporations,” the research found.
Paying with crypto
While there’s a growing appetite to own and trade cryptocurrencies, using digital tokens as a means of payment has been relatively slow to develop.
That is also set to change this year. Auckland-based blockchain startup Immersve has struck a deal with credit card provider Mastercard which allows users to tap the funds in their crypto digital wallet to make digital and physical payments where Mastercard is accepted.
Blockchain is a decentralised method for organising and recording cryptocurrency transactions, with each crypto coin or token generated by creating digital blocks on the chain. Bitcoin became notorious for the “mining” required to create those blocks, an ingenious computational system that required miners to devote increasing amounts of computing power to the process. That helped regulate the supply of Bitcoin, but also saw vast amounts of energy devoted to data centres and computers mining Bitcoin.
Similar systems use so-called smart contracts to track and secure the transactions on the blockchain and convert crypto into fiat money payments, so retailers simply receive a cash payment rather than having to handle cryptocurrencies themselves.
Another innovative Kiwi startup, Lightning Pay, is offering merchants the ability to accept Bitcoin payments, which once again are converted into cash for easy settlement. These developments will soon see more alternatives to Eftpos and credit and debit card payments.
Moves by the government will also clear the way for the uptake of crypto. The OECD’s crypto asset reporting framework will take effect on April 1, 2026, in New Zealand, requiring crypto-asset service providers to share transaction details with tax authorities.
The Reserve Bank of New Zealand is exploring the possibility of a Central Bank Digital Currency, with plans to have it in place by 2030. That won’t replace cash but will, instead, create a digital New Zealand dollar to better facilitate digital financial transactions.
A matter of trust
The collapse of FTX, which saw Bankman-Fried inappropriately combine customers’ crypto holdings with a related hedge fund, leading to the collapse of the exchange into bankruptcy, sent shockwaves through the industry.
Other exchanges have increased transparency in their holdings and improved financial management to try and rebuild confidence in the crypto industry. But the fact remains that crypto is a highly speculative sector and new blockchain projects are launched every week, seeking to raise cold hard cash as part of a coin offering – the digital, decentralised equivalent of taking a company public on a stock exchange.
Donald Trump’s meme coin (trading as TRUMP) was launched on his Truth Social platform on January 17 and surged in value to US$70 per coin before plunging to around $20. Still, a cryptocurrency that was dreamt up virtually overnight and has no assets backing it other than Trump’s immense brand power now has a market valuation of nearly US$4 billion.
That tells you everything you need to know about the crypto space. As an investment, it’s not for the faint-hearted. But blockchain applications for payments, financial services and information exchange will speed up transactions, cut red tape and make life easier. That transition will require blockchain creators to show they can respect data privacy and offer adequate security as we increasingly allow our sensitive information to exist on the chain.