Reserve Bank welcomes submissions on future of New Zealand's money
Te Pūtea Matua (The Reserve Bank) has opened the doors to a discussion on the future of money, including the role of digital money.
The Bank released two issues papers for public consultation today, the Te Moni Anamata - Kaitiakitanga (The Future of Money – Stewardship) and Te Moni Anamata – Aparangi ā Te Pūtea Matua (The Future of Money – Central Bank Digital Currency).
“We’re seeking public input on how we should perform our role as steward of money and cash, and how we should assess the case for central bank money in a digital form alongside cash,” explains assistant governor Christian Hawkesby.
“Trends in cash use and availability along with digital innovation create opportunities to innovate as well as challenges. We believe these should be discussed widely and our consultations aim to encourage that.”
The Future of Money – Central Bank Digital Currency paper discusses the possibility of a central digital currency and whether it fits with the future of New Zealand.
“The Reserve Bank’s overall belief is that a CBDC would be a useful development for central bank money, because it would both support the value anchor role of central bank money, and support the ability of central bank money to act as a fair and equal way to pay and save,”
The paper also addresses challenges:
- How a CBDC may affect the banking sector requires careful consideration.
- 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.
- A CBDC has the potential to act as a catalyst for innovation and competition in the wider money and payment ecosystem, but it could potentially crowd out innovation.
“A Central Bank Digital Currency 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.
The Future of Money – Stewardship issues paper discusses the monetary system (the network of systems that provide cash, money, and payment systems) that supports the economy. It assumes that New Zealanders value monetary sovereignty.
The Bank aims to prioritise its work in three areas:
- Optimising the lifecycle management of physical cash – and therefore New Zealanders’ access to it – by redesigning the system that makes cash available around New Zealand (actively or by supporting private sector initiatives).
- Exploring the opportunities and threats posed to the monetary system by a form of private-sector digital asset – stablecoins.
- Assessing the potential case for a New Zealand central bank digital currency.
“As 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 - so 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,” adds Hawkesby.
Hawkesby adds that the Bank understands and accepts the case for keeping cash for as long as people need it.
Both issues papers are available on the Reserve Bank’s website with feedback open for 10 weeks, closing 10 am, Monday, 6 December 2021.
The Bank will also release a third issues paper in November that discusses issues within the cash system and how to achieve efficiency and resilience.