Many government central banks are looking into the feasibility of using a central bank digital currency. New Zealand is the latest to announce that it is exploring the possibility. One of the main benefits is its use as a monetary policy tool.
China has already launched trials of its own digital yuan, and has been attempting to expunge all competition from the country in the form of blanket bans of cryptocurrencies and the mining of them.
New Zealand is yet another country that is investigating the benefits of these types of centralised digital currencies. The Royal Bank of New Zealand released a public consultation document today that included the following statement:
“Trends in cash use and innovation in money present an opportunity for the Reserve Bank to consider broadening central bank money to include a widely available digital form. The declining use, acceptance and availability of cash in New Zealand, and emerging innovations in private money, namely stablecoins, make this an opportune time to consider a central bank digital currency (CBDC).”
According to an article on Bloomberg, the bank admits to a huge amount of complexity in developing such an asset, and a lengthy amount of time in which to do so, however, the CBDC would enable individuals to convert “private money” into digital bank money.
It would enable the NZ currency to remain relevant in a digital future, and would provide the government with a very useful monetary policy tool. The RNBZ stated:
“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. Similarly, while a CBDC has the potential to act as a catalyst for innovation and competition in the wider money and payment ecosystem, we will have to consider the potential for it to crowd out innovation.”
In addition, according to the bank, such a currency would improve how domestic payments were made, and would also act to upgrade cross-border payments.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.