New Zealand\u2019s central bank is exploring the possibility of issuing a digital currency, saying the benefits it would bring include its potential use as a monetary policy tool.<\/p>\n
\u201cTrends in cash use and innovation in money present an opportunity for the Reserve Bank to consider broadening central bank money to include a widely available digital form,\u201d the RBNZ said Thursday in documents released for public consultation.<\/p>\n
\u201cThe 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).\u201d<\/p>\n
While developing a CBDC would require long lead times given the complexities and involve a multi-stage approach, the RBNZ said it broadly favors the idea. A digital currency should support the New Zealand dollar \u201cas our single unit of account\u201d and be exchanged 1-for-1 with cash, it said, adding \u201ccash is here to stay for as long as some of us need it.\u201d<\/p>\n
The RBNZ said a digital currency would support the value anchor role of central bank money by:<\/p>\n
A digital currency could also bring improvements to domestic payments\u2019 efficiency and resilience, and enable New Zealand to take part in global initiatives that use CBDCs to improve cross-border payments, the RBNZ said.<\/p>\n
Other central banks around the world, including the European Central Bank, are also exploring the possibility of issuing a digital currency. However, the RBNZ said a CBDC is not without challenges and requires careful consideration.<\/p>\n
\u201cAs 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,\u201d it said.<\/p>\n
\u201cSimilarly, 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.\u201d<\/p>\n
The RBNZ is seeking public input on the idea until Dec. 6. It gave no indicative time-line for the introduction of a digital currency but said it would release an outline of the next steps by the end of April.<\/p>\n