Digital money and central bank digital currencies (CBDCs) are attracting increasing attention, and central banks around the world are exploring the possibility of issuing their own digital currencies. New Zealand has also joined this trend and launched a consultation on digital currency. The Reserve Bank of New Zealand launched a consultation on digital currency on Wednesday, asking citizens to comment on it. The advisory requested responses to issues such as digital currency design, whether interest is payable, and the existence or absence of holding limits.

The central bank believes that digital money can support innovation and has therefore decided to launch a consultation in this area. New Zealand began consulting on the future of digital currency and CBDCs in 2021, stating at the time that a digital currency could present “an opportunity”. The 2024 consultation said digital money will offer more options when making payments, be easy to access and support innovation, taking advantage of new innovation features such as smart contracts.

According to the consultation document, the public’s opinions about digital money will be received and the decisions to be taken within the framework of these opinions will be shaped. The central bank is considering a holding limit of $2000, similar to the benchmark for the digital Euro. One of the purposes of this limit is to prevent the abuse of digital money and protect financial stability.

Central banks around the world are exploring the possibility of issuing their own digital currencies as crypto has grown in popularity over the past few years. New Zealand’s steps in this area are particularly important as they come at a time when the digital economy is becoming increasingly important. This type of digital currency could make payments faster and more efficient, while also increasing financial inclusion and reducing costs.

The consultation document states that digital money could increase competition in New Zealand’s payments landscape and encourage innovation by supporting new forms of money and payment services from the private sector. “Digital money can increase competition in New Zealand’s payments landscape, supporting new forms of money and payment services from the private sector,” the consultation paper said. Digital currency in New Zealand will be distributed by the private sector and New Zealanders will have the opportunity to choose the services they use.

New Zealand’s CBDC is going through a multi-stage, multi-year process, and the country has yet to decide on issuing one. The digital currency will be denominated in New Zealand dollars, will be exchanged 1-to-1 with physical money, and will be accessible 24/7. The consultation will close on July 26 and citizens are expected to submit their views until then. This process could play an important role in shaping New Zealand’s future monetary policies and contribute to the development of the digital economy.