New Zealand will be exploring the feasibility, benefits and risks that a central bank digital currency (CBDC) poses. The Reserve Bank of New Zealand will be consulting the public on how a CBDC can work alongside cash, as well as issues arising from digital currencies like Bitcoin (BSV) and stablecoins like the proposed Facebook’s Diem.
In a press release, the Reserve Bank of New Zealand revealed it will be consulting the public on financial technologies that will determine “the future of how New Zealanders pay and save.”
Christian Hawkesby, the assistant governor of the central bank, remarked, “We’ll be considering not only what we should be doing as steward, but what a resilient and stable cash and currency system in New Zealand might look like, and how we might best respond to digital innovations in money and payments.”
As with many other central banks, one of the fields that the bank will be exploring is a CBDC. According to a survey by the Bank for International Settlements (BIS), about 86% of central banks are actively researching the potential for CBDCs, with 60% already experimenting with the technology.
The New Zealand central bank will be releasing a series of papers for feedback from the public between August and November. One of these will be on CBDCs and digital currencies.
The bank stated, “Subsequent papers will look at the potential for a Central Bank Digital Currency (CBDC) to work alongside cash as government-backed money, issues arising from new electronic money forms including crypto assets (such as BitCoin) and stable coins (such as proposed by a Facebook-led consortium), and how the cash system might need to change to continue to meet the needs of users.”
In New Zealand, the use of cash has been steadily declining. However, the economy is still quite cash-reliant, with the central bank’s data showing that 80% of New Zealanders carry at least some cash in their wallet. The country has lagged its economic peers when it comes to phasing out cash.
Nevertheless, the Reserve Bank has noted a rise in digital payments. It stated, “…we know that digital forms of payment are the preferred way of paying for the majority of us, and that the future will undoubtedly involve less cash.”
A CBDC could play a major role in the transition to a cashless economy, or at least in the reduction in cash payments.
Hawkesby concluded, “The potential for a Central Bank Digital Currency to help address some of the downsides of reducing physical cash use and services is something we want to explore for New Zealand. A CBDC, similar to digital cash, might well be part of the solution, but we need to test our assessment of the issues and proposed approach before developing any firm proposals.”
Watch: CoinGeek Zurich panel, Stablecoins on BSV
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.