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Banks keen on crypto conversation

The Reserve Bank of New Zealand is seeking feedback on the potential for a Central Bank Digital Currency as the use of cash continues to decline.

Friday, July 16th 2021, 6:09AM

by Matthew Martin

The bank signalled its intent to consult with the New Zealand public on a national digital currency as part of its Future of Cash consultation programme which will be held between August and November this year.

Both the ANZ and BNZ told Good Returns they're keen to enter the conversation when it gets underway.

The Reserve Bank consultation coincides with Parliament's Finance and Expenditure Committee announcement on Tuesday that it will be opening an inquiry into the current and future nature, impact, and risks of cryptocurrencies.

RBNZ assistant governor Christian Hawkesby says the bank will be releasing a series of money and cash issues papers for feedback "...on the broad concepts of money and cash stewardship, and outline specific topics to be covered in the rest of the series".

Hawkesby, who is also the Reserve Bank’s general manager of economics, financial markets and banking, says subsequent papers will look at the potential for a Central Bank Digital Currency (CBDC) to work alongside cash as government-backed money, issues arising from new electronic money forms including crypto-assets such as BitCoin and stable coins (such as proposed by a Facebook-led consortium), and how the cash system might need to change to continue to meet the needs of users.

“Knowing that the money held in our bank accounts can be withdrawn in central bank money backed by the New Zealand government – currently only available through physical cash - is an unspoken promise which helps promote trust in banks and the financial system," Hawkesby says.

“The potential for a Central Bank Digital Currency to help address some of the downsides of reducing physical cash use and services is something we want to explore for New Zealand.

"A CBDC, similar to digital cash, might well be part of the solution, but we need to test our assessment of the issues and proposed approach before developing any firm proposals."

A BNZ spokesperson says the BNZ welcomes the reserve bank's exploration of the future of cash.

"More than 90% of our transactions are digital, and this figure continues to rise as customers prefer convenient and secure ways to pay. Cash usage has been declining over the last few years, and this accelerated throughout the pandemic.

"We look forward to working with the RBNZ and the government on these complex issues into the future," the BNZ spokesperson says.

An ANZ Bank spokesperson says while it's still early days "...we’ll keep an eye on progress and we’re happy to work with them as they develop their thinking.

"We look forward to taking part in the consultation process later in the year."

Finance and Expenditure Committee chairperson Dr Duncan Webb says Parliament's inquiry will further its understanding of an increasingly important topic.

The terms of reference for the inquiry are to inquire into and establish the nature and benefits of cryptocurrencies, to establish how cryptocurrencies are created and traded, to understand the environmental impact of "mining" cryptocurrencies, to identify risks to users and traders of cryptocurrencies and the risks cryptocurrencies pose to the monetary system - including tax implications.

It will also look at how crypto-currencies are used by criminal organisations and whether they can be regulated.

Tags: ANZ BNZ consultation cryptocurrency government RBNZ

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