He was accepted under the "high-investment category" after putting $10 million into government bonds and making a large donation to the Christchurch earthquake fund.
Disclosing details of his convictions for the first time, Dotcom said he was convicted for "hacking" under juvenile law and for insider trading because of ignorance about a share-trading law.
He said both convictions were more than 10 years ago and had been wiped by Germany's clean-slate law.
"Officially I am as clean as it gets. I am not a bad person with a bad character and, in my opinion, Simon Power is small minded and unreasonable.
"In New Zealand, murderers have been released from prison within a decade. You would think that the New Zealand Government believes in giving people a second chance."
Dotcom said his crimes were "victimless" and "committed from my home computer".
He said the hacking case led to him working for companies and governments and becoming a "white-hat hacker" - the good guys of the online world.
Dotcom said the decision did not affect his family's love for New Zealand "and our hope to provide our kids with a safe future in a beautiful environment". "My wife and I have decided for our family to move away from Hong Kong and become ordinarily resident in New Zealand. Therefore in a little more than a year's time we will not require ... consent to buy the homes we desire."
He said the family planned to return to New Zealand shortly as his wife, Mona, was again pregnant and the couple's other children missed the outdoors and their pet animals.
"We love New Zealand, no matter the haters."
Dotcom said the message he took from the rejection was that the Government wanted his money and job-creation capacity "but you can't buy the home you desire for your family".
"To my family, our friends and business partners this doesn't make sense. It's a flawed process that is hurting New Zealand."
Dotcom said the decision had led him to reconsider plans to expand his level of investment in New Zealand beyond the $10 million already in government bonds.
He said he had planned investment which would have led to jobs for an additional 30 people beyond the 20 he already employed.
He said he was also scaling back plans for a big New Year's Eve fireworks display. "Mr Power will have achieved nothing but hurting hard-working New Zealanders and embarrassing his country."
A spokesman for Immigration NZ said Minister Jonathan Coleman was not involved in making the decision to grant Dotcom residency.
