Future of Money – Central Bank Digital Currency | Te Moni Anamata – Aparangi ā Te Pūtea Matua

We were seeking feedback from 30 September to 6 December 2021 on our proposed approach to exploring whether a CBDC is right for Aotearoa. Feedback is now closed, but you can read the issues paper here, and we have published a summary of responses received.

Read the Summary of responses to our 2021 issues papers

Read the Future of Money – Central Bank Digital Currency issues paper (PDF 3MB)

Navigating this issues paper

Sections 1-3 provides background material to the issues discussed in this paper and to enable readers to engage fully with the rest of the paper. It includes descriptions of key terms used in the paper and our thinking on whether a CBDC would support our role as steward of money and cash, particularly in a digital future.

  • Introduction.
  • What is a CBDC
  • Motivation and process for considering a CBDC

Sections 4-7 outlines some of the opportunities presented by the CBDC, as well as challenges and risks posed. It then proposes a set of high-level CBDC design principles.

Consultation questions are listed in Section 8.

  • Opportunities of a CBDC
  • Challenges and risks of a CBDC
  • Developing CBDC design principles
  • Conclusion and next steps
  • Have your say

The Appendices provide additional materials, including a primer on the current state of our payment system, a discussion on the features from different design choices, and the impact of CBDC on our bank balance sheet.

  • A primer on the inefficiencies in New Zealand’s payment system
  • Account-based vs token-based digital money
  • Reserve Bank balance sheet
  • Wholesale CBDC

Executive summary

At the Reserve Bank of New Zealand – Te Pūtea Matua (the Reserve Bank) we characterise our mandates, roles and responsibilities in terms of the Tāne Mahuta narrative (depicted in the following Introduction). In this metaphor, central bank money forms part of te Toto, the sap of the tree representing our financial system (Tāne Mahuta). We have a role in ensuring that te Toto is healthy and resilient, thereby supporting the rest of the Reserve Bank’s strategic roles and mandates as represented by other parts of Tāne and his ecosystem.

As kaitiaki o te toto – the steward of money and cash in New Zealand – we aim to ensure that central bank money contributes to a sound and dynamic monetary and financial system by being:

  1. A stable anchor of value and confidence and convertibility in our money.
  2. A fair and equal way to pay and save in our modern and inclusive economy.1

This objective reflects the fact that central bank money (whether in physical or digital form) plays an underpinning role in ensuring that all prices are set in New Zealand dollars and that people can confidently expect to be able to make payments and settle debts in New Zealand dollars now and into the future.

Trends in cash use and innovation in money present an opportunity for the Reserve Bank to consider broadening central bank money to include a widely available digital form, and so continue to meet the needs of New Zealanders. The declining use, acceptance and availability of cash in New Zealand, and emerging innovations in private money, namely stablecoins, make this an opportune time to consider a central bank digital currency (CBDC).

The Reserve Bank’s initial CBDC considerations are focused on the public policy case for, or against, a CBDC that would be available to all individuals, communities and businesses. We refer to this as a ‘general-purpose’ CBDC, which we will shorten to CBDC in this paper.

Following on from Future of Money – Stewardship paper, this issues paper sets out the Reserve Bank’s view of the high-level policy opportunities and challenges that a CBDC may confer. In this sense it can be thought of as a discussion on the in-principle case for a CBDC. In practice the exact costs and benefits of a CBDC will depend very much on specific design details that we are not yet at the point of considering. Instead, this paper is intended to explain to the public how we see the abstract advantages and disadvantages, costs and benefits, and risks and opportunities that a CBDC might offer. It is intended as the starting point for a conversation with stakeholders on the potential role of a CBDC for New Zealand.

Developing a CBDC would require long lead times given the inherent complexities, multiple design choices and policy choices to be made. This means we will need to take a multi-stage approach to policy development, with this Issues paper being the first of many should we confirm our position on the case for a CBDC.

The Reserve Bank’s overall belief is that a CBDC would be a useful development for central bank money, because it would both support the value anchor role of central bank money, and support the ability of central bank money to act as a fair and equal way to pay and save.

A CBDC directly supports the role of central bank money as a value anchor by:

  • Providing individuals and businesses with the option of converting privately issued money into a digital form of central bank money (ensuring the long-term convertibility of private money into central bank money).
  • Improving the technological form of central bank money to ensure it remains relevant in a digital future.
  • Providing an additional monetary policy tool (by it being either issued to provide monetary stimulus, or interest bearing).

A CBDC both directly and indirectly provides a fair and equal way to pay and save by:

  • Directly providing a basic form of paying and saving to all at a low cost, and acting as a gateway to the formal financial sector.
  • Supporting wider financial inclusion and wellbeing efforts, including through partnering with government programmes.
  • Providing individuals with freedom and autonomy in saving and paying by giving them greater choice, and providing a personal back-up in times of uncertainty.

Finally, a CBDC and its ecosystem (including the distribution model) have the potential to act as a catalyst for innovation and competition in the wider money and payments ecosystem. This could bring improvements to domestic payments’ efficiency and resilience, as well as enable New Zealand to take part in global initiatives that use CBDCs to improve cross-border payments.

However, a CBDC is not without challenges:

  1. How a CBDC may affect the banking sector requires careful consideration.
  2. As with other forms of digital money, a CBDC must be operationally resilient to outages and cyber security risks, maintain data privacy, and it would need to comply with all relevant regulation.
  3. Similarly, while a CBDC has the potential to act as a catalyst for innovation and competition in the wider money and payment ecosystem, we will have to consider the potential for it to crowd out innovation.

Given its assessment of policy issues, the Issues paper proposes a set of high-level design principles that would need to be incorporated in a CBDC issued to all. The Reserve Bank invites your feedback on the CBDC policy analysis and design principles.


  • 1 See The Future of Money - Stewardship issues paper (September 2021)