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The Assistant Governor of the RBNZ explained that a system of Central Bank Digital Currency will fight the cons of reduced physical cash flow.
A recent announcement made by the Reserve Bank of New Zealand confirms the Central Bank’s efforts towards establishing a Central Bank Digital Currency or CBDC.
A series of Research Reports prepared by the RBNZ track the changing financial system in New Zealand, shedding light on the rise of digital payment systems and their effect on the broader picture. To invite feedback from the general public on research papers dedicated to the establishment of a CBDC and issues arising from cryptocurrencies and stable digital coins, the Central Bank would be having public consultations. These discussions will eventually affect the way the Kiwis would pay and save. These matters have been identified during the Future of Cash consultations in 2019.
According to Assistant Governor of the RBNZ Christian Hawkesby, the possibility of withdrawal of central bank money backed by the New Zealand government, which currently is available in cash form, will promote people’s trust in the country’s financial system. A system of Central Bank Digital Currency will fight the cons of reduced physical cash flow, he further added. The Bank is also dedicated to building a firm and full proof proposal through required evaluation of the issues at hand and an assessment of the proposed approach to be adopted.
Key Findings of the Research Reports Encouraging a Potential CBDC in New Zealand
These reports give a clear picture of the cash use patterns among the New Zealanders across 2017, 2019 and 2020 and also an insight into their preferred channels for payment. The big change in the graph during 2020 can be a direct effect of COVID-19 restrictions. This transition, recorded worldwide, has given an impetus to digital payments even in everyday transactions.
Here are some of the most important statistics.
From 96 percent of the population using cash for everyday shopping in 2017 and 2019, there has been a remarkable drop to just 70 percent of the population doing the same in 2020.
The value of cash withdrawals has observed a 20 percent reduction compared to February 2020 numbers.
Cash preference took a fall from 12 percent in 2019 to 9 percent as of last year i.e. 2020.
The proportion of New Zealanders having cash in their wallet went from 80 percent in 2019 and 2017 to 64 percent in 2020.
A whopping 83 percent of the population whose debit/EFTPOS use plunged agreed to continue using this cashless method post the pandemic.
Half of the country’s total population agreed that they used less cash compared to what they were using a year ago.
These findings have encouraged the Central Bank to promote and enhance the country’s digital payment systems in addition to studying the benefits of cryptocurrencies like Bitcoin. New Zealand is not the only one to have started exploring a CBDC. Major economies around the world are open to discussion regarding CBDCs like the European Union although China is at the forefront with the issue of e-CNY. Korea and Sweden are not much behind as they have already begun their CBDC testing in recent months.