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Read the Future of Money – Stewardship issues paper (PDF 2.5 MB)
Download a copy of the feedback form (PDF 120KB)
Navigating this issues paper
Part A (Sections 1 to 3)
Part A provides background information to let you engage fully with the rest of the paper. It includes descriptions of the main terms and assumptions, and explains why central bank money matters. It covers:
- why New Zealand needs a money and cash steward
- why central bank money matters.
Part B (Sections 4 to 8)
Part B outlines how we propose to act as steward of money and cash and describes the proposed priorities for policy. Consultation questions are listed at the end of each section. This section covers:
- stewardship of money and cash
- cash system redesign
- central bank digital currency.
The appendices provide a glossary and extra information, including a comparison of our proposed approach to stewardship with a commonly applied framework. These cover:
- what underpins confidence in central bank money
- how we support the monetary system
- our proposed approach to stewardship, contrasted with the government’s published views about what constitutes good stewardship practice.
Executive summary of issues paper
This issues paper is about money. The systems that provide cash and other forms of money and that enable the making of payments exist as a complex, interconnected network. This network—‘the monetary system’—underpins everything that happens in the economy. Ensuring that the monetary system is healthy and efficient and meets the needs of stakeholders is a core responsibility of any central bank. Meeting the needs of stakeholders increasingly means providing innovative and efficient options for people. One characteristic of a healthy monetary system is that it can adapt to innovation and improve in a safe and resilient way.
This is the first in a series of papers that seek feedback on a number of issues related to the health, efficiency and choices offered by the monetary system. The purpose of this paper is to:
- introduce the context for our work programme on money and cash issues, and the key concepts that underpin this work
- invite feedback on our proposed interpretation of our responsibilities for the monetary system—as steward of money and cash—including outlining our proposed objectives and approach
- introduce and receive feedback on our proposed priority areas for policy development as steward of money and cash.
One of our important functions in maintaining the health of the monetary system is the issuing of central bank money, in the form of cash, to the public. Central bank money performs two vital tasks:
- It provides a fair and equal way to pay and save. It contributes to social and financial inclusion by being one option that enables people and businesses to pay and save and undertake other socially meaningful exchanges, like gifting to and rewarding others.
- It provides a ‘value anchor’ for the monetary system. Only central bank money performs this role. This means that central bank money ensures New Zealand retains ‘monetary sovereignty’, by having access to independent monetary policy as a tool to achieve price stability and sustainable employment and respond to economic shocks.
An important assumption underpinning this paper is that New Zealanders value monetary sovereignty.
We have monitored and reported on developments affecting New Zealand’s monetary system for some time. In 2017, we launched an investigation into cash use and cash distribution. This led to public consultation on cash-related issues in 2019.2 Then in 2020, we created a new department—the Money and Cash department—Tari Moni Whai Take to better deliver on our responsibilities for the smooth functioning of the monetary system.
Legislative changes (in 2019 and 2021) have been happening alongside our ongoing work in this area. Together, the legislative changes and establishing the Money and Cash department have increased our capacity to act to ensure money and cash in New Zealand, and the monetary system, are meeting the needs of New Zealanders.
The monetary system and the environment that surrounds it are always changing. Three key trends in the monetary system are important drivers of the issues that underpin the proposals in this overarching paper (and the series of more detailed papers that will follow it):
- a continuing decline in the use of cash in transactions
- digital innovation in money and payments
- opportunities to stimulate innovation in the wider payment systems.
In our view, these trends pose both opportunities to stimulate innovation to enhance the prosperity and wellbeing of New Zealanders and credible threats to the stability and functioning of the monetary system.
Given the trends outlined above, we intend to expand and seek to formalise our system stewardship role in respect of money and cash issues. Our objectives as steward are to ensure, now and in the future, that the money we issue as a central bank (central bank money) is:
- a stable value anchor for the monetary system
- available as a fair and equal way to pay and save.
This, in turn, will ensure that New Zealanders have access to money in forms that suit them and their changing needs.
In delivering this stewardship role, we intend to take a proactive approach, ensuring the systems we oversee are modern, agile and forward-looking. As some responsibilities for policies that affect the monetary system are held outside the Reserve Bank, we will work in a collaborative and coordinated way with other agencies to take a strategic, system-wide approach. Our preliminary analysis suggests we may need more powers if we are to fulfil our stewardship responsibilities. This paper explains where we think these regulatory gaps lie.
In our role as steward of money and cash issues, we will prioritise work in the following three areas:
- Optimising the lifecycle management of physical cash—and therefore New Zealanders’ access to it—by redesigning the system that makes cash available around New Zealand (actively or by supporting private sector initiatives).
- Exploring the opportunities and threats posed to the monetary system by a form of private-sector digital asset—stablecoins.
- Assessing the potential case for a New Zealand central bank digital currency.
This issues paper is accompanied by others on the topics of central bank digital currency (September 2021) and cash system redesign (November 2021).