The Reserve Bank of New Zealand (RBNZ) is seeking public feedback on the possibility of issuing a central bank digital currency (CBDC).
The RBNZ issued an issues paper outlining the central bank’s view of the high-level policy opportunities and challenges of issuing a CBDC. Rather than going into specific design details, the paper explains the abstract advantages and disadvantages, costs and benefits, risks and opportunities, and risks and opportunities of issuing a CBDC. The paper, according to the RBNZ, “is the starting point for a conversation with stakeholders about the potential role of a CBDC for New Zealand.”
Given the inherent complexities, multiple design options, and policy choices involved, the central bank stated that developing a CBDC would take many stages. As a result, the RBNZ is taking a staged approach to policy development, with this issues paper serving as the first stage.
CBDC is a ‘potential catalyst.’
The declining use of cash and emerging payment technologies, according to the RBNZ, necessitate the consideration of a CBDC. A digital currency should be able to exchange 1:1 with cash and support the New Zealand dollar as “our single unit of account.”
The RBNZ expects that a central bank digital currency will be able to support the central bank’s role in a variety of ways. Individuals and businesses, for example, should be able to convert privately issued money into digital form.
The CBDC development should improve the technological form of central bank money, ensuring its future relevance. Naturally, the RBNZ could issue it as an additional monetary policy tool to provide monetary stimulus. Finally, it should improve domestic payments while also allowing New Zealand to participate in cross-border payments.
“A CBDC, like other forms of digital money, must be operationally resilient to outages and cyber security risks, maintain data privacy, and comply with all relevant regulation,” the RBNZ added. “Similarly, while a CBDC has the potential to act as a catalyst for innovation and competition in the broader money and payment ecosystem, we must consider the possibility that it will crowd out innovation.”
The RBNZ is seeking public feedback on the issue until December 6.