New Zealand is exploring the possibility of launching its own digital currency, the latest indication of how much such currencies are transforming the market.
The rise of cryptocurrencies has sparked a major shift in the finance market. Many governments are still struggling to come to terms with — and adapt to — a currency that is designed to be decentralized and anonymous.
El Salvador has chosen to adopt Bitcoin as legal tender, while other countries are exploring stablecoins, digital currencies that are linked to a country’s legal tender.
According to Bloomberg, New Zealand is investigating the possibility of releasing its own digital currency, in an effort to keep current with modern trends.
“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,” the RBNZ said Thursday. “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 RBNZ highlighted some of the challenges involved in creating a successful digital currency.
“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. 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.”