New Zealand will get its crypto-based dollars back early next year, in a move that will likely cause excitement among local cryptocurrency investors and enthusiasts, and incomprehension among the rest of the population.
Known as the NZDT, the New Zealand dollar token is the country's first cryptocurrency token "tethered to the NZ dollar". It was launched under the radar in May last year, after several speakers at the annual blockchain conference raised problems they were having without one.
In particular, investors wanted a safe and easy way to use the New Zealand banking system to buy and sell digital currencies like Bitcoin.
Problems include high currency exchange costs and the risks of buying direct from an overseas seller and ending up with nothing but a hole in your bank account.
The NZ dollar digital token, issued by Christchurch-based cryptocurrency exchange Cryptopia, allowed Kiwis to deposit real money into a Cryptopia bank account, and receive the equivalent number NZ dollar-backed cryptocurrency tokens. An investment of $100 NZ Dollars would receive 100 tokens.
Punters could then use those digital tokens to buy Bitcoin, or other cryptocurrencies. If they wanted to get NZ dollars back out, they just did the transaction in reverse.
As Bitcoin soared and bounced, NZDT was an easy way for Kiwis to get in on the speculative action.
However, Cryptopia suspended the crypto NZ dollar tokens late last year after its bank, ASB, got cold feet about regulatory issues and difficulties identifying customers and their activities.
Cryptopia's business development manager Adam Lyness said that in many ways the tokens were a victim of their own success, and of the banks' fear of the unknown.
The crypto-tokens system was put together literally overnight during the 2017 blockchain conference, he said, with the company taking an 'ask forgiveness, not permission' approach.
But it took off.
"Initially we were just small, flying under the radar. But within three or four months we were transacting NZ$1 million a day - significant business. The bank's challenge was how does this sit with our compliance and KYC [know your customer] obligations.
"It was our money in the account, but we were moving fast and building the market and the bank was worried: what if customers used the bitcoin to do something bad like buy drugs on the black market?
"This was at the same time as scandals in Australia, and they didn't want unexpected headlines. Their inclination was to pull the service."
Cryptopia gave customers a month to get their money out of the system and pulled the plug.
A year later, Lyness says the company has a new, smaller bank behind the crypto NZ dollar token system and should be ready to relaunch the NZDT in the first quarter next year. He says the company is engaging with government and regulators who, he says, are as curious rather than condemnatory.
A meeting in Wellington had to be moved to a new venue because of all the people wanting to attend, he says.
Bell Gully's Campbell Pentney is both a cryptocurrency tax expert and a keen trader himself. He says getting the NZ dollar-tethered tokens back will make a significant difference.
"Not having them matters hugely," Pentney says. "It was going great guns, growing massively fast, and then suddenly there was no banking access. People are saying: 'how do I buy bitcoin?'
"There are a few cryptocurrency exchanges in New Zealand, but volumes are very low and few people are using it. If you had a large amount in bitcoin, it would be quite difficult to get it out. Some banks are cautious about cryptocurrencies and anti-money laundering legislation and some go as far as closing your account you if you are dealing with cryptocurrencies."
Although the NZDT was largely used to buy cryptocurrencies in the past, the market is expected to expand into other digital assets in the future, Pentney says.
"Let's assume blockchain takes off and has amazing projects all over the world. Without an NZ dollar entry point, New Zealanders will find it hard to invest in these projects directly. Because getting money from your bank here into one of these cross-border exchanges takes days and involves big fees."
By contrast, transferring tokens or coins from the Cryptopia system is almost instantaneous and involves only the company's transaction fee.
While trade around cryptocurrencies has largely been about speculation so far, Lyness said there are far more mundane potential uses for the NZDT.
"For example, I'm a member of a wine club at Canterbury University. Everyone comes to a wine tasting, which costs $15, so they end up with a pile of cash to take to the bank. You could use the NZDT, take the payment from people's phones using a payments app and a 2D barcode sitting on the table. You hold your phone up and it's done.
"Another example could be a market stall. A lot of people don't carry cash and it's expensive to work with a bank and take credit card payments. If you could get new payment mechanisms at scale, merchants could take payments using NZDT. It's cheap and low fees."
Lyness says demand is still strong for the NZDT, although the company's business has been hit by a recent dramatic fall in cryptocurrency trading volumes and flat prices.
The price of Bitcoin has remained around the US$6,400 ($9,445) mark for almost two months and, worldwide, average cryptocurrency volumes have fallen from US$2.1 trillion a day in December 2017 to US$260 billion.
Cryptopia bosses are hoping the Christmas upturn in cryptocurrency trading which has happened during the past four to five years will manifest itself this year. In the meantime the company has 100 staff and is looking at how it can diversify.
"We've been lucky enough to be in the right place at the right time, but need to be a broader blockchain financial business," Lyness says. "We are looking to build financial services outside speculation, using knowledge we've gained from our cryptocurrency business."