Reserve Bank of New Zealand
- The Reserve Bank of New Zealand is considering creating a digital currency.
- The RBNZ discussed the idea in a report published Thursday on the future of money.
- RBNZ sees digital transactions on the rise as the use of the country's cash declines.
- See more stories on Insider's business page.
New Zealand's central bank is looking at the potential of creating a digital currency, with officials in a report Thursday saying such a project could foster further innovation in the country's payments system.
The Reserve Bank of New Zealand sought public feedback on papers focusing on the future of money which included a proposed digitized currency at a time when the use of cash is declining.
"A Central Bank Digital Currency would see the features and benefits of cash enjoyed in the digital world, working alongside cash and private money held in commercial bank accounts," RBNZ Assistant Governor Christian Hawkesby said in a statement.
The use of cash dropped to 19% of household transactions in 2019 from 30% in 2007, it said. Meanwhile, people have increasingly turned to phone-based payment apps and digital wallets as well as other new and private technologies that make transactions more convenient. The RBNZ named Apple Pay as an example of a tool for transactions.
"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," or CBDC, it said. A stablecoin is a cryptocurrency designed to be pegged to central bank-issued currency and is backed by traditional assets such as short-dated government bonds.
The bank said "well-designed stablecoins" may have benefits such as more consumer choice leading to increased competition, provided they don't monopolize a market or limit RBNZ's ability to influence the country's interest rates.
The majority of the world's central banks are studying the benefits and drawbacks of CBDCs, according to a survey by the Bank for International Settlements. Federal Reserve Chairman Jerome Powell this week said the central bank's report exploring a potential digital dollar is due soon and that it would be "ideal" to work with Congress on creating such an asset.
The window for public feedback to the RBNZ closes on December 6.