Source: MIL-OSI Submissions
Source: Reserve Bank of New Zealand
8 February 2022 – New Zealand’s money and cash system is at a “cross road” and innovation is necessary to build a sustainable future, Adrian Orr, Governor of the Reserve Bank of New Zealand – Te Pūtea Matua told a conference of Angel Investors in Wellington today.
“We must decide how best to use of digital technology to modernize central bank money, while we continue to ensure cash remains an option for those who need it. An innovative approach is needed to support a more efficient and resilient cash system, and the changes required are potentially far reaching,” Mr Orr said.
The Bank is commencing Central Bank Digital Currency (CBDC) proof-of-concept design work, taking into account the public’s feedback received during recent consultation. The work will be a multi-stage and multi-year effort, and no decision has yet been made on what form of CBDC was right for New Zealand.
“The technology exists now to implement a CBDC, but it needs to be well designed. At a basic hygiene level, a CBDC must be user-friendly, resilient to cyber and other operational risks, and enable privacy. These features promote widespread trust and use,” Mr Orr said.
Mr Orr referred to the resounding feedback from the public on the importance of privacy in their money.
“We believe that a CBDC can be designed in such a way that privacy can exist alongside design features that make it hard for central bank money to be used for nefarious or illegal purposes. The emphasis we place on privacy reflects the fact that the CBDC design will be driven by broad community, rather than specific commercial, interests.”
A CBDC would provide a platform for economic and financial innovation, including competition in the payments and settlement sector, cross-border transfers, and financial inclusion and capability building tools.
Consultation on an issues paper, Future of Money – Cash System Redesign (Te Moni Anamata – He Whakahou i te Pūnaha Moni) closes on 7 March 2022, with about 190 submissions received so far. The paper sets out issues facing the cash system, largely driven by falling transactional cash use, and raises options including requiring banks to offer cash services and retailers to accept cash.
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