What are private sector innovations in money?
Private innovations in money include cryptoassets and stablecoins.
Cryptoassets and stablecoins are different from cash or money in your bank account because they don't need to rely on banks to be traded or used. They are digital tokens that can be transferred, directly from person to person, or through an exchange.
What is the difference between private innovations in money and central bank money?
Central bank money is money issued by us, the Reserve Bank. Because it's backed by the Government, it will always maintain a stable value.
Private cryptoassets are not backed by the Government. The value of many cryptoassets don’t have a stable price and can fluctuate widely day-to-day. They also have weak legal protections and face limited regulation.
These private innovations can benefit New Zealanders because they offer more competition, efficiencies and news ways of doing things. But they also have risks. Cryptoassets and related services are regulated in a limited way — this means if something happens to your funds, it may be hard to get your money back.
Our goal as Aotearoa New Zealand's central bank is to make sure New Zealand has reliable and efficient money and payment systems that support innovation and inclusion, while managing any disruptions to our financial system and monetary sovereignty.
This is why we have a strong interest in new and existing forms of private money like cryptocurrencies.
Our consultation in 2022 showed there are there are both opportunities and costs associated with cryptoassets, along with significant risks.
We have started strengthening how we monitor cryptoassets and stablecoins in New Zealand. It's important we take a cautious but vigilant approach.
We're looking at what other countries are doing to regulate cryptocurrencies so we can learn from them. We'll also continue to work with other government agencies like the Council of Financial Regulators (CoFR) to work through any risks together.