Many state central banks are exploring the possibility of using central bank digital currency. New Zealand is the latest to announce it is exploring the possibility. One of the main advantages is its use as a monetary policy tool.
China has already started tests of its own digital yuan and is trying to eliminate any competition from the country in the form of blanket bans on cryptocurrencies and their mining.
New Zealand is another country that is researching the benefits of these centralized digital currencies. The Royal Bank of New Zealand today released a public consultation document which contains the following statement:
“Trends in the use of cash and monetary innovation offer the Reserve Bank an opportunity to consider expanding central bank money into a widely used digital form. The decline in the use, acceptance, and availability of cash in New Zealand, and the emergence of innovations in private money, namely stablecoins, make it an opportune time to think about a central bank digital currency (CBDC).
According to an article on Bloomberg, the bank admits tremendous complexity in developing such an asset and a long time to do so, but the CBDC would allow people to turn “private money” into a digital bank. . Money.
This would allow the New Zealand currency to remain relevant in a digital future and provide a very useful monetary policy tool for the government. The RNBZ said:
“As with other forms of digital currency, a CBDC must be operationally resistant to cybersecurity risks and disruptions, maintain data confidentiality, and comply with all relevant regulations. Even if a CBDC has the potential to act as a catalyst for innovation and competition in the larger money and payments ecosystem, we need to consider its potential to eliminate innovation. “
In addition, according to the bank, such a currency would improve internal payments and also improve cross-border payments.