It has been reported that the paper outlines CBDC purposes, designs, as well as potential benefits and associated risks. The bank will be seeking comments on the proposed paper until December 6. The document focuses on a “general-purpose” CBDC that is a digital currency issued to “any individual or business that wants to use it.”
“Such a ‘general-purpose’ CBDC would be closer in function to cash and better placed to fulfil the role of central bank money than a ‘wholesale’ CBDC.”
However, the bank noted that it emphasized that a potential New Zealand CBDC would be digital money issued by the bank alongside cash. While the amount of cash in circulation has been growing in New Zealand, it is still used “proportionately less for transactions by most people.”
Christian Hawkesby, the Assistant Governor of RBNZ, said:
“We want people to know that the case for keeping cash is well understood and accepted by the Reserve Bank. Cash is here to stay for as long as some of us need it.”
The report said that the paper also points out two major technological CBDC designs, including an “account-based” CBDC that relies on conventional account-based structures and a “token-based” CBDC, which is enabled by new technologies such as blockchain and public-private key cryptography.
The bank further said that a token-based CBDC could enable the automatic execution of certain actions like rent or bill payments through smart contracts, thus reducing the need for manual or third-party involvement. A token-based CBDC could also support the development of new retail payment services.
Likewise, its proposed CBDC offers an opportunity to design a form of money that balances interests of both privacy and traceability.
“Users may want to retain full privacy in transacting, for either legitimate or unlawful reasons. Meanwhile government agencies may want to retain some traceability of CBDC balances or tokens to reduce tax evasion or avoidance, or money laundering and financing terrorism.”
Thus, the RBNZ officially announced its plans to open up public consultations regarding a CBDC in July. Last year, Hawkesby claimed that New Zealand had “no imminent plans” to issue a CBDC.