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Cryptocurrency education not regulation the way to go

Resilience and nature of cryptocurrencies will defy lawmakers

South Korea’s recent attempt to regulate cryptocurrencies and calls for New Zealand to take the lead in this area are misguided because the very appeal of bitcoin is that it can’t be regulated. Public education and acceptance of cryptocurrencies as a tool – not an investment – may be the only way to stop people getting burnt.

CEO of New Zealand’s largest peer-to-peer mortgage lender Southern Cross Partners, Luke Jackson, says that despite what some governments and regulatory bodies may say or do, cryptocurrencies are a technological marvel which, like peer-to-peer lending, is providing a fintech alternative to bank dominance and trying to resist it is probably futile.

“There may be an opportunity here because it is a new way of thinking, but not in the way people are currently thinking about it.

“Ideally cryptocurrencies should be viewed as a form of currency that can make cross border trade safe and easy. Treating it as an investment or an asset is speculative and dangerous. The only thing standing behind cryptocurrencies is emotion – greed or FoMO (fear of missing out).

“We hear from many mom and pop investors, so we know that FoMO is very strong in the Kiwi psyche. We tell people that nobody should ever invest in something they don’t understand. A good investment is something you understand.”

Mr Jackson said that understanding of, or the simplicity of property investment, may be the reason why it remains such a popular investment choice – people can understand the risks and reward associated with properties, but not so much with other investments like shares (hence why they’re not as popular as property).

“How do you know you’re getting a fair return on your risk when you don’t understand your risk? Cryptocurrencies are going to be around awhile – they’re resilient because they’re useful. They’re not a fad, and I am concerned that Kiwi investors will end up being lured into risks they don’t understand for rewards they can’t comprehend.

“It is not uncommon for investors to hear stories from friends and families. FoMO quickly sets in and they make mistakes – we need better education around finance generally, but particularly in cryptocurrencies.”

Mr Jackson said that few people in the general investor population really understand cryptocurrencies, or even other types of investment for that matter, and often it seems people are reluctant to admit that don’t understand; that’s when they get into trouble.

“Most investments, such as our peer-to-peer mortgage lending product, will have providers behind them who are able to provide education and information. Cryptocurrencies don’t have identifiable providers to provide that education,” he said.

Southern Cross Partners is an FMA (Financial Markets Authority) licensed peer-to-peer lender which matches borrowers and investors together and then facilitates residential property loans supported by a registered mortgage over the borrower’s property.

The company utilises a network of mortgage advisers who help people that don’t fit typical bank lending criteria, even when they have good equity to back their loans (for example, self-employed people).

Under the Southern Cross Partners model, investors invest funds in a loan which the investor owns (together with other investors who contribute to that loan), while Southern Cross Partners manages the loans. If no investors put their hands up to invest in a loan, Southern Cross Partners will fund and retain that loan itself.

The process is completely transparent, and all the details are available.

For more information about P2P investing (including the risks) visit http://southerncrosspartners.co.nz or contact your investment advisor

© Scoop Media

 
 
 
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