The Reserve Bank will publicly consult on the public policy cases for a central bank digital currency (CBDC), as well as testing the perceived benefits and challenges of introducing one.
In its Statement of Intent for 2021 to 2024, the Reserve Bank says it's investigating the future of money, including the need for digital money issued by the Reserve Bank to the general public, being a CBDC.
"A CBDC could be complementary to cash and would provide many of the benefits of cash. It could also provide digital fiat money and ensure the role of fiat money is preserved into the future. We will consult the public on the high-level public policy cases surrounding CBDC and develop a work plan to test the perceived benefits and challenges," the Reserve Bank says.
"We’ll likely be announcing a timetable for that work in the next week or so," a Reserve Bank spokesman told interest.co.nz.
These comments come after Christian Hawkesby, Reserve Bank Assistant Governor and General Manager of Economics, Financial Markets and Banking, in May said the Reserve Bank is among dozens of central banks actively researching central bank digital currencies.
"We have a money and cash department which is in part dedicated to thinking about things like that. So we're working on it and we're planning to say more about it through the course of this year," Hawkesby said.
Meanwhile, the Reserve Bank also says digital innovation in money by the private sector brings new opportunities and risks to the money and cash system.
"Opportunities could include greater convenience and efficiency, but risks could include undermining public confidence in the money system, risks to financial stability or risks to our ability to set monetary policy. Our work on stewardship will therefore consider whether we have sufficient regulatory tools to meet our objectives and manage the risks to the money and cash system."
The Reserve Bank's recently created money and cash department is responsible for the production and distribution of bank notes and coins, plus evaluating broader policy issues associated with the future of money in New Zealand. The Reserve Bank last year named Ian Woolford, who has worked at the central bank for 30 years, head of its money and cash department.
"As the steward of money and cash, we ensure that policy, regulatory and operational settings support the performance of fiat money now and into the future. Digital innovation and the declining use of cash create risks that fiat money may not perform its two vital functions effectively, while other forms of money may not yet be valid substitutes. We ensure fiat money adapts to these challenges and continues to meet the needs of the public, and support a stable financial system and prosperous and inclusive economy," the Reserve Bank says.
It says the cash system as it currently is isn't sustainable in a world where cash is used less and less.
"Ensuring sustainability requires either a series of changes to the cash system or a transformational redesign of the entire system. To consider what change is required and our role in this, we will undertake a broad and strategic review of the cash system," the Reserve Bank says.
"The objective of the review will be to ensure that the physical and business arrangements for cash distribution are efficient, resilient, lower carbon and set up to meet the public’s needs now and into the future. The review will also take into account the public benefits and the increasing cost and efficiency challenges of providing cash."
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