The Reserve Bank of New Zealand (RBNZ) published an issue paper providing its perspective on central bank digital currencies (CBDC). The document focuses on a “general-purpose” CBDC, a digital currency issued to “any individual or business that wants to use it.” the paper outlines CBDC purposes, designs, as well as the potential benefits and associated risks. The bank will be seeking comments on the proposed paper until Dec. 6.
A general-purpose’ CBDC would be closer in function to cash.
“Such a ‘general-purpose’ CBDC would be closer in function to cash and better placed to fulfill the role of central bank money than a ‘wholesale’ CBDC,” RBNZ wrote. The central bank emphasized that a potential New Zealand CBDC would be digital money issued by the bank alongside cash. While the amount of cash in circulation has been growing in New Zealand, it is still used “proportionately less for transactions by most people,” the central bank noted. Central banks across countries are actively working on digital currencies to ward off competition from decentralized and private cryptocurrencies.
“Cash is here to stay for as long as some of us need it.”
“We want people to know that the case for keeping cash is well understood and accepted by the Reserve Bank. Cash is here to stay for as long as some of us need it,” RBNZ assistant governor Christian Hawkesby said. The paper also points out two major technological CBDC designs, including an “account-based” CBDC that relies on conventional account-based structures and a “token-based” CBDC, which is enabled by new technologies like blockchain and public-private key cryptography. According to the RBNZ, a token-based CBDC could automatically execute certain actions like rent or bill payments through smart contracts, thus reducing the need for manual or third-party involvement.