In an era increasingly defined by digital transactions, the Reserve Bank of New Zealand (RBNZ), also known as Te Pūtea Matua, is exploring the introduction of a digital cash system. Their initiative aims to complement, rather than replace, the traditional use of physical cash, acknowledging the evolving payment landscapes while maintaining a stronghold on accessibility and security.
The RBNZ recently announced that it is in stage 2 of a comprehensive, multi-year strategy to examine the feasibility of digital cash. Having already issued an issues paper and conducted the first round of consultations in 2021, the bank is now seeking public feedback on its newly developed design principles and options. The outcomes of this stage are crucial in determining the future trajectory, with stages 3 and 4, which will occur between 2024 and 2030, poised to adapt based on these findings.
Central to the RBNZ’s approach is its commitment to public engagement. “We want to ensure that our design for digital cash truly meets the needs and expectations of all New Zealanders,” said a spokesperson for the RBNZ. The bank is actively encouraging feedback from the community to gauge whether the proposed designs align with public expectations and requirements.
Digital cash, as proposed, would be issued by the RBNZ and aims to provide a seamless integration with existing payment systems. This new form of currency would give users the option to continue using conventional bank accounts and payment methods, or to opt for a digital alternative that promises equal parts convenience and reliability. Unlike cryptocurrencies and other forms of digital money that are often subject to market volatility and security concerns, the digital cash from RBNZ would be government-backed and denominated in New Zealand dollars, ensuring stability and trust.
A key feature of the proposed digital cash system is its accessibility and privacy. The RBNZ plans for the digital cash to be usable even in scenarios where traditional digital payment systems might fail, such as during power outages. Furthermore, transactions made with digital cash would be private, with the RBNZ not having visibility over individual expenditures.
By integrating features like smart contracts, the digital cash system could potentially enhance user control over transactions and finances, fostering innovation within New Zealand’s financial landscape. It also promises to boost competition among payment services, offering consumers more choices regarding who manages their digital cash.
You can download the ‘Digital cash in New Zealand’ consultation paper here. Accenture, a member of the Digital Pound Foundation, have also published a supporting paper to this consultation, which you can download here.
