[NEWS] New Zealand's central bank begins CBDC discussions

The Reserve Bank of New Zealand (RBNZ), the central bank of New Zealand, has launched its second consultation on CBDC (central bank digital currency).

Since its first investigation in 2021, New Zealand has spent a lot of time and effort exploring how to position and plan to design CBDC.

The consultation will run until July 26th. Based on feedback and preparation of a business case, it will move to stage 3 preparation.

The CBDC being discussed in New Zealand will be a resale type, and wholesale type is not currently being considered. This is because international payments are not a priority.

The RBNZ has carefully considered how to position CBDC in terms of functionality and control. After that, it concluded that it would choose the UK and Sweden models as countries that realize innovation. In this situation, it will be something that citizens can use through private companies.

Positive but cautious stance on CBDC

RBNZ's approach to CBDC is positive, but it still remains cautious. The report reviewed the international CBDC landscape and stated that "full-scale issuance and widespread user adoption is unlikely this decade."

It also seems that, based on past efforts, consumers will be cautious in adopting CBDCs, as issuing CBDCs would entail significant effort, cost, and complexity. Therefore, the RBNZ sees CBDC as a long-term vision.

In addition, one of the reasons for issuing a CBDC is the declining frequency of use of the New Zealand dollar, which is the legal currency. It expressed concern that if this trend continues, monetary sovereignty may be threatened. In addition, it said that the decline in cash use could threaten the financial inclusion of citizens who rely on cash.

According to the RBNZ survey, about 60% of consumers still use cash regularly. In addition, more than 98% have a bank account.

The digitalization of economic activity is also accelerating the decline in cash use. Taking these circumstances into account, the RBNZ seems to be exploring the possibility of offering a CBDC.

Reference:Documents
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