New Zealand’s Apex Bank Considers Launching CBDC

New Zealand is the latest nation to join the race for a Central Bank Digital Currency (CBDC). The Reserve Bank of New Zealand issued a statement highlighting the need to reassess the current financial system and proffer a ‘broader currency system’ for its citizens. The apex bank will spend the rest of the year consulting and researching on the future of payment in New Zealand. Assistant Governor of the Reserve Bank, Christian Hawkesby said:

“We’ll be considering not only what we should be doing as steward, but what a resilient and stable cash and currency system in New Zealand might look like, and how we might best respond to digital innovations in money and payments.”

Speaking further, Hawkesby said that the first phase of consultation will cover the concept of money, while subsequent phases will deal with how CBDCs can be integrated to function effectively with the New Zealand dollar to meet user demands and to align with innovation.

“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.” He said.

CBDCs an Emerging Prospect

CBDCs have become a global phenomenon and have gained traction amongst central banks, especially with the growing need to regulate the digital asset space. Unlike fully decentralized cryptocurrencies with no central backing like Bitcoins, CBDCs will be issued and regulated by central banks. This, they believe, will enable users to enjoy the benefits of transacting with digital currencies while allowing regulators and federal authorities to checkmate illicit activities.

Bitcoin and other cryptocurrencies have been subject to backlash from notable individuals in the banking sector, despite growing adoption. Lars Rohde, the Governor of Denmark’s central bank referred to Bitcoin as a “speculative fad” while his English counterpart, Andrew Bailey opined that Bitcoin has no intrinsic value, before warning investors that they should be prepared to lose money. ECB’s Christine Lagarde has also maintained a hard stance on cryptocurrencies. The former Managing Director of the IMF said earlier this year that Bitcoin has consistently served as a vehicle for fraud, money laundering and other financial crimes.

With China amongst the frontrunners, more central banks are embracing the idea of developing their own digital currencies. The most populous nation completed the biggest trial for a digital currency in March 2021. The government distributed over 40 million digital yuan to citizens and traders in Chengdu, encouraging them to embrace it as a means of payment. While some countries intend to launch their CBDCs and accommodate cryptocurrencies, others are working towards launching their digital currencies to outrightly replace decentralised cryptocurrencies. A lower parliament in India earlier proposed a bill to ban the use of ‘private cryptocurrencies’ in order to facilitate the development of the digital rupee.

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