Reserve Bank digital currency – too early to say
26 June 2018
A speech delivered today by Reserve Bank Deputy Governor Geoff Bascand gives the Bank’s position on issuing an official digital currency, and the verdict, “not now”.
In the speech titled In Search of Gold: Exploring central bank issued digital currency, Bascand says the Reserve Bank has explored whether issuing a digital currency could better meet the needs of the public.
“Issuing a central bank digital currency would ensure public access to legal tender money regardless of the presence of cash,” Mr Bascand says.
“A digital currency is easier and faster to distribute around the country than banknotes because it doesn’t need to be transported, but there would be new infrastructure costs if a central bank digital currency were introduced.
“We’re also interested in whether a central bank digital currency could bring improvements to the payments system. Here the pros and cons very much depend on how the digital currency is designed. Digital currencies with central control can improve efficiency but potentially at the expense of reduced resilience. At this time, a blockchain-type of official digital currency would reduce the efficiency of the payments system.”
On financial stability matters, a core role of the Reserve Bank, Bascand says: “One of the most important contributions a central bank makes to prosperity is supporting financial stability. We couldn’t issue a digital currency if it might undermine financial stability, and there are considerable risks on this front”.
Bascand concludes: “The payments industry is dynamic and the Reserve Bank is searching for ways to harness new technologies and do things better. Maintaining trust and confidence in our currency, and in the payments and banking system means that in a gold rush we must be a very considered prospector; we have New Zealand’s financial system at stake. Currently, it is still too early to determine whether a digital currency should be issued”.