New Zealand Cautiously Consults On “Digital Cash.”

The Reserve Bank of New Zealand (RBNZ) 1—Te Pūtea Matua has announced its intention to launch a central bank digital currency.

It recently launched its second central bank digital currency (CBDC) consultation following its first consultation in 2021. It announced intentions to launch a central bank digital currency without making definite conclusions or commitments, emphasizing that it was looking at a ‘multi-stage, multi-year’ transitioning process upon a positive outcome on the consultation slated to end on July 26, 2024.

One of the primary motivations for the change is concerns for New Zealand’s monetary sovereignty. There has been a decline in the use of paper money and more activity in the digital currency scene following the emergence of cryptos. Crypto is quickly being adopted by international businesses and consumers. Similarly, the online gaming and casino sector has embraced crypto, with popular online games like Crash powered by digital currencies at crypto casinos. The RBNZ is concerned that the increasing availability of digital currencies could lead to foreign currency denomination in the country’s financial sector. Another reason is concerns about reduced financial inclusivity for local businesses dependent on paper money.

In speaking about financial inclusivity, the RBNZ, in a consultation paper published on April 17, stated: “We want the certainty and safety of using digital cash to be available to all New Zealanders and businesses alongside physical cash. Digital cash design should also carefully meet or balance different considerations if it’s to work for everyone.”

The consultation process involves examining design options and obtaining opinions from the general public on the reception of the currency. The currency is slated to exist concurrently with cash, coins, electronic banking, and other forms of payment.

It stated that upon completion of the consultation process, it would be set to move on to stage three of the process. Still, the bank could, however, request more surveys should it need to call for it.

Currently, only an online survey has been made available. However, the bank stated that arrangements were being made for alternate formats for consultations that would be made available in late May.

The benefits of embracing ‘digital cash’ highlighted by the bank’s director of money and cash, Ian Woolford, include making room for innovation that would enable New Zealand’s ‘powerful fintech sector.’ In addressing security concerns that follow the adoption of the currency, Woolford noted that the digital cash would be secure and work using Bluetooth so that payments can be made without an internet connection.

He stated that: “Digital cash would be mainly used for payments by individuals and businesses, to pay online, in-store, or even to pay your child’s pocket money in the same way you can use cash currently. You could use it to do new things like make an instant digital payment to anyone in New Zealand.” As Woodford stated, digital cash could be used to purchase goods online, play games, wager at crypto casinos, and much more – if embraced by New Zealand.

As enthusiastic as the RBNZ is about the prospect, it remains cautious about the implementation process. It believes integrating the currency into its system will be a carefully monitored process involving a sizable amount of expenditure, human resources, and effort. It views CBDC as a long-term project with a time estimate of 2030.