Is digital currency just around the corner?

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The Reserve Bank of New Zealand is looking into launching its own digital currency in addition to the banknotes and coins we use today. But it’s not time to throw away our wallets just yet.

‘Digital cash’ would be a new type of money that would exist alongside banknotes and coins and the electronic money in our bank accounts – it wouldn’t replace cash.

Individuals and businesses could use it to pay online, in-store, or to pay a child’s pocket money in the same way we use cash now. It is described as making it easier and quicker to buy things and is safe and secure, backed by the government.

“You would likely need a digital wallet, payment card, or phone app to access your digital cash. You wouldn’t need a commercial bank account to use it,” says Reserve Bank director of money and cash Ian Woolford.

Just like banknotes, you could use digital cash when the power is out, or the internet is down. The Reserve Bank wouldn’t be able to see or control how the money is used and it could be swapped 1:1 with physical cash.

Woolford says Kiwis are using physical cash less and finding it harder to access. The Bank’s latest cash use survey (due out soon) shows cash use declined fast under Covid and is not bouncing back.

It is currently asking Kiwis for feedback on the features that are important to us with digital cash and wants to know the challenges, benefits, and concerns we envisage. The plan is to introduce the new payment option in about 2030 if it gets the final go-ahead following consultation. If so, this would be the first digital form of currency in NZ backed by the government and available to the public.

“Digital cash would ensure that central bank money is available to all New Zealanders and is able to be used digitally. It would also help enable a money and payments system that is innovative, competitive and contributes to the development of New Zealand’s digital economy,” Woolford says.

It also offers a more stable alternative to the likes of cryptoassets, smart contracts and digital currencies issued by global tech companies. 

“New Zealand’s money must innovate to stay relevant and useful and ensure our monetary sovereignty,” Woolford says.

The consultation is open until 26 July 2024 and more information is available at the Reserve Bank website.

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