The Reserve Bank of New Zealand (RBNZ) has opened up public consultation over proposals to introduce a central bank digital currency (CBDC). RBNZ Assistant Governor, Christian Hawkesby, has said that the trends in cash could pave way for greater innovation in money. This stems from the content in recently released discussion papers on digital currency titled “The Future of Money-Stewardship” and “The Future of Money-Central Bank Digital Currency”.
Hawkesby noted the potential of CBDC in helping to address some of the problems associated with physical cash use. The RBNZ has noted the declining use, acceptance and availability of cash in the country as a driving force behind providing a more widely available digital form of currency. The creation of ‘Stablecoins’ was also highlighted as being a contributing factor. These are cryptocurrencies that are tied to traditional currency, ensuring a relatively stable value unlike what has been seen with other cryptocurrencies like Bitcoin. According to Hawkesby, a CBDC could retain the same features and benefits of cash, but in a digital world. Several other central banks and the European Central Bank are also considering Stablecoins.
It was however acknowledged that developing such currency would require long lead times and careful consideration due to the many complexities and a needed multi-stage approach. Amongst the challenges that would need to be addressed include cyber security risks, data privacy, and compliance with relevant regulations.
The introduction of a CBDC is expected to grant individuals and businesses the opportunity to convert privately issued money into a digital form of central bank money, help to improve the technological form of central bank money so it remains relevant in a digital future and provides an additional monetary policy tool. It is also hoped to improve the domestic payments efficiency and resilience and better empower the country to partake of global initiatives by boosting cross-border payments. Additional benefits could include lower costs for consumers when it comes to payment and savings, plus greater freedom and autonomy of choice.
Regardless of whatever happens with digital currency considerations, physical cash is not likely to be affected. Hawkesby assured that the Reserve Bank understood the need to keep cash in circulation and preserve the cash system for those that needed it. This did not however negate the need to reflect on emerging cash trends and consider the options in digital innovation and the challenges it could help overcome.
Though there is no timeline on when such digital currency may come into being, the RBNZ has indicated that further details will be released by the end of April 2022. The public is free to give their input until December 6.
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