The declining use, acceptance and availability of cash in New Zealand and emerging innovations in private money, namely stablecoins, make this an opportune time to consider a central bank digital currency (CBDC).
That’s the word from the Reserve Bank of New Zealand (RBNZ), which has called for public input on two issues papers. One looks at how it should perform its role as the steward of money and cash. The other examines how it should assess the case for central bank money in a digital form alongside cash.
“As the steward, we want to ensure that our central bank money remains a stable value anchor for the monetary system and available as a fair and equal way to pay and save, ensuring that New Zealanders have access to money in forms that suit them and their changing needs. These outcomes mean that New Zealand keeps its monetary sovereignty,” says RBNZ Assistant Governor Christian Hawkesby.
Trends in cash use and availability along with digital innovation create opportunities to innovate as well as challenges, he says.
Hawkesby says the RBNZ believes a CBDC would see the features and benefits of cash enjoyed in the digital world, working alongside cash and private money held in commercial bank accounts. “It could make for much more efficient and integrated platforms benefitting individuals and businesses, as well as protecting monetary sovereignty. However, any decision to issue a CBDC would need to carefully consider operational risks, such as cyber security, and impacts on the financial sector.”
He wants people to know that the case for keeping cash is well understood and accepted by the RBNZ. “Cash is here to stay for as long as some of us need it. In November, we will be releasing a third issues paper that will set out the issues facing the cash system and explore high-level options to achieve greater efficiency and resilience,” he says.
In an executive summary of the CBDC paper, the RBNZ says developing a CBDC would require long lead times given the inherent complexities, multiple design choices and policy choices to be made. “This means we will need to take a multi-stage approach to policy development, with this Issues paper being the first of many should we confirm our position on the case for a CBDC.
But it adds: “As with other forms of digital money, a CBDC must be operationally resilient to outages and cyber security risks, maintain data privacy, and it would need to comply with all relevant regulation.
“Similarly, while a CBDC has the potential to act as a catalyst for innovation and competition in the wider money and payment ecosystem, we will have to consider the potential for it to crowd out innovation.”
The Future of Money – Stewardship and Future of Money – Central Bank Digital Currency issues papers are available on the RBNZ website with feedback open for 10 weeks, closing 10am, Monday, 6 December 2021.