Money and Cash Department - Tari Moni Whai Take
Recognising the Reserve Bank’s role and responsibilities – as issuer and steward of New Zealand’s money and operator of key payments systems – we are building our analytical, policy and governance capability to support this strategic leadership. Looking forward, we remain open minded about how the technology of money and payments will continue to evolve. Central banks around the world, including us, are researching retail central bank digital currencies (CBDC). Although we have no imminent plans to issue a CBDC, we are well-connected and considering these developments very closely.
Bringing you money that’s fit for purpose
Going forward, our role as steward of cash requires us to build a strategy for the future of currency in New Zealand.
To do this, we recently raised the profile of our Future of Cash initiative and created a new department called Money and Cash - Tari Moni Whai Take. Te reo Māori version of the name sums up its purpose nicely, “the department bringing money that’s fit for purpose”.
This department is now responsible not only for the production and distribution of bank notes and coins, but also for evaluating the broader policy issues associated with the future of money in New Zealand. Accompanying this, we are planning to establish a new governor-level Payments and Currencies Committee, responsible for strategic, policy and oversight decisions for our roles as an issuer of currency, operator of payments and settlement systems, and steward of the cash system.
Trends in digital money
As steward of currency, we must also look to the future of money and remain open to emerging payment methods.
Payments are predominantly digital. Consumers are increasingly drawn to convenient methods of payments including contactless cards and mobile wallets. Meanwhile banks, big tech and fintech firms are innovating with new types of payment instruments and methods. Some firms and consortiums are proposing new ways of paying that rely on crypto-assets or so called ‘stablecoins’ and distributed ledger technology. (Crypto-assets are generally tokens that rely on cryptographic methods and non-traditional payment infrastructure to be transacted and stored. Stablecoins is an industry term that refers to the issuer’s intention to stabilise the value of a crypto-asset relative to a certain asset(s) such as a fiat currency. The name stablecoin does not confirm its stability.)
Among these trends, central banks around the world are exploring the benefits of and potential for retail CBDCs that are issued to the public. CBDCs present a range of high-level benefits and challenges as previously described in our 2018 research (see below).
In particular, CBDCs provide a digital form of legal tender money to the public and represent a claim on the central bank. In contrast, electronic deposits held in commercial banks are a claim on a commercial bank and although they might be low risk, they are not completely risk free and could be lost if the commercial bank failed.
We have no immediate plans to launch a CBDC in New Zealand. We are, however, following developments very carefully, and are among the 80 percent of central banks that are actively researching CBDCs.