By exploring the issuance of a central bank digital currency (CBDC), the Reserve Bank of New Zealand (RBNZ) is seeking public opinion.
The RBNZ released an issues paper that explains the central bank’s perspective of the high-level policy opportunities and challenges of issuing a CBDC. Rather than going into specific design details, the document explains the abstract pros and cons, costs and benefits, and the risks and opportunities of issuing a CBDC. According to the RBNZ, the paper “is the starting point for a conversation with stakeholders on the potential role of a CBDC for New Zealand.”
The central bank noted that developing a CBDC would require many steps given the inherent complexities, multiple design choices, and policy choices involved. Accordingly, the RBNZ is taking a multi-stage approach to policy development, with this issues paper being the first of such stages.
CBDC a “potential catalyst”
According to the RBNZ, the decline in the use of cash and emerging payment technologies require consideration of a CBDC. A digital currency should support the New Zealand dollar “as our single unit of account,” and be exchanged 1:1 with cash.
The RBNZ predicts that a central bank digital currency may support the role of the central bank in various ways. For instance, it should enable individuals and businesses to convert privately issued money into a digital form.
The development of the CBDC is expected to improve the technological form of central bank money, ensuring that it remains relevant in the future. Naturally, as an additional monetary policy tool that the RBNZ could issue it to provide monetary stimulus. Finally, it should also bring improvements to domestic payments and allow New Zealand to participate in cross-border payments.
“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,” the RBNZ added. Likewise, while a CBDC has the potential to act as a catalyst for innovation and competition in the larger money and payments ecosystem, we will need to consider the potential for it to crowd out ‘innovation.”
The RBNZ is seeking public opinion on the matter until December 6.
