The key innovation for the future of money and cash

New Zealand’s money and monetary system is at a crossroads and innovation is needed to build a sustainable future, Adrian Orr, Governor of the Reserve Bank of New Zealand – Te Pūtea Matua said today at a angel investor conference in Wellington.

“We need to decide how best to use digital technology to modernize central bank money, while continuing to ensure that cash remains an option for those who need it. An innovative approach is needed to support a system more efficient and resilient cash flow, and the changes required are potentially far-reaching,” Mr. Orr said.

The Bank is commencing work on the proof-of-concept design of the Central Bank Digital Currency (CBDC), taking into account public feedback received during the recent consultation. The work will be a multi-stage, multi-year effort, and no decision has yet been made on which form of CBDC would be best for New Zealand.

“The technology now exists to implant a CBDC, but it needs to be well designed. At the level of basic hygiene, a CBDC must be user-friendly, resistant to cyber and other operational risks, and enable privacy. These features promote widespread trust and usage,” Orr said.

Mr. Orr spoke of the resounding reactions from the public about the importance of keeping their money private.

“We believe that a CBDC can be designed in such a way that privacy can coexist with design features that make it difficult for central bank money to be used for nefarious or illegal purposes. Our emphasis on privacy reflects the fact that the design of the CBDC will be driven by a broad community, rather than specific business interests.

A CBDC would provide a platform for economic and financial innovation, including competition in the payments and settlements industry, cross-border transfers, financial inclusion, and capacity building tools.

The consultation on a theme paper, Future of Money – Cash System Redesign (Te Moni Anamata – He Whakahou i te Pūnaha Moni) closes on March 7, 2022, with approximately 190 submissions received to date. The document outlines the problems facing the cash system, largely due to the decline in the use of transactional cash, and proposes options, including requiring banks to offer cash services and retailers to accept cash .

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