New Zealand’s central bank has lined up among financial authorities on the issue of issuing their own digital currency. The financial regulator is now seeking public opinion on the need for a digital form of national fiat, in addition to promising to save cash.
The Central Bank of New Zealand considers the risks and benefits of CBDC
The Reserve Bank of New Zealand (RBNZ) is now collecting input from the public on the possible use of the central bank’s digital currency (CBDC), Reuters said after an announcement released by the bank on Thursday. Christian Hawksby, assistant governor of RBNZ, said financial authorities were still “working to save cash and the cash system for those in need.”
A central bank’s digital currency will see the features and benefits of cash in the digital world, working alongside the cash and personal money in a commercial bank account.
A senior official said in detail that a CBDC could benefit both individuals and businesses by facilitating the establishment of a more efficient and integrated platform. A digital New Zealand dollar can also help protect the country’s financial sovereignty. Hawksby, the bank’s general manager for economics, financial markets and banking, was quoted as saying:
As stewards, we want to ensure that our central bank money is anchored to the financial system at a stable price and available as a fair and equitable way to pay and save money – to ensure that New Zealanders have access to money that suits them and their changing needs.
At the same time, the banker acknowledged that a digital currency would pose some functional risks, including the nature of cyber security, and affect the conventional financial sector. Hawksby then insisted that any decision to introduce CBDC would have to consider these issues carefully.
In a paper with the statement, the Reserve Bank of New Zealand pointed to a decline in the use and acceptance of paper cash in the country, which could be another major objective of creating a national digital currency. The financial institution also highlights innovation in private money such as the emergence of stable currencies.
Other central banks in the region are already cooperating on the CBDC front. In early September, reports came in that the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore and the Reserve Bank of South Africa were preparing to test the use of state-issued digital currencies in international payments. Banks explained that the goal of this collaboration is to create a shared platform for cross-border transactions using different CBDCs.
The trials, led by the Bank for International Settlements (BIS) Innovation Hub, are aimed at establishing whether the central bank’s digital currency can facilitate transactions and reduce their costs. The hub leads similar projects in China, Hong Kong, Thailand and the UAE, while it is collaborating with the Bank of France and the Swiss National Bank to test wholesale digital currencies in border settlements.
Central banking institutions in dozens of countries around the world are currently working to develop and launch CBDCs, including the People’s Bank of China, arguably the most advanced project. The US Federal Reserve, the Bank of Russia and the European Central Bank are also moving towards issuing their own digital currencies.
Do you think the Reserve Bank of New Zealand will finally decide to issue a national digital currency? Share your expectations in the comments section below.
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