The Reserve Bank of New Zealand issues an issue paper on digital money
The Reserve Bank of New Zealand (RBNZ) has released an issue paper on central bank digital currencies (CBDC).
The Statements of The Reserve Bank
The article explains the CBDC’s goals, designs, and the possible advantages and dangers that come with them. The proposed paper will be open for public feedback until December 6th.
The proposal focuses on a “general-purpose” CBDC. This is a digital currency that may be used by “any individual or business.”
“A ‘general-purpose’ CBDC, rather than a ‘wholesale’ CBDC, would be closer in function to cash. Therefore, better situated to fulfil the role of central bank money,” the RBNZ stated.
A possible New Zealand CBDC, according to the central bank, would be digital money issued by the bank alongside currency. There is an increase in the quantity of cash in circulation in New Zealand. However, most people still use it “proportionately less for transactions,” according to the bank.
“We want people to know that the Reserve Bank understands and accepts the justification for holding cash. “Cash will be here for as long as some of us require it,” stated RBNZ assistant governor Christian Hawkesby.
Two Primary CBDC Designs
The article also discusses two primary technical CBDC designs: an “account-based” CBDC that uses traditional account-based structures and a “token-based” CBDC that uses emerging technologies such as blockchain and public-private key cryptography.
According to the RBNZ, a token-based CBDC may allow smart contracts to automate the execution of specific operations such as rent or bill payments, removing the need for manual or third-party participation. According to the bank, a token-based CBDC may also aid in creating new retail payment services.
Money That Balances Privacy Concerns
The reserve bank also stated that the planned CBDC provides a chance to create a form of money that balances privacy and traceability concerns. “Users may choose to maintain complete anonymity when transacting for a variety of reasons, both legal and illegal. Meanwhile, government agencies may wish to keep some traceability of CBDC balances or tokens to combat tax fraud, avoidance, money laundering, and terrorism funding, according to the RBNZ.
In July, the Reserve Bank of New Zealand (RBNZ) announced its intention to hold public consultations on a CBDC. Last year, Assistant Governor of the Reserve Bank of New Zealand Christian Hawkesby stated that New Zealand has “no urgent intentions” to issue a CBDC.
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