New Zealand’s CBDC roadmap enters design consultation stage

The Reserve Bank of New Zealand opened a new consultation period on a central bank digital currency (CBDC) on April 17.

The current stage of development seeks input on “high-level design options for digital cash.”

Digital New Zealand dollar

Current plans describe digital cash denominated in New Zealand dollars (NZD) that retail users can swap for physical cash, bank deposits, and other balances.

New Zealand’s Reserve Bank would be responsible for issuing the CBDC but would not provide the asset directly to users. Instead, the private sector, including banks and payment firms, would distribute digital cash to users and provide related services.

The Reserve Bank describes the CBDC as private, secure, and trustworthy, emphasizing that it will not control or monitor users’ CBDC spending.

The CBDC also aims to enhance financial inclusion. It will be broadly accessible and specifically cater to “unbanked users,” not requiring a bank account. It will support offline functionality, enabling transactions via Bluetooth during outages.

The system will retain some form of oversight and control. Private services will conduct identity checks when users open accounts or initiate transactions, along with broader compliance checks, though the Reserve Bank will not handle identity data.

CBDC vs. crypto

The Reserve Bank compared the CBDC to other emerging financial technologies, such as stablecoins and cryptocurrencies, asserting that a CBDC would pose less risk to New Zealand’s monetary sovereignty and economy than these alternatives.

The CBDC will also support smart contracts, facilitating programmable payments commonly associated with blockchains and distributed ledgers.

Current plans allow smart contracts to enable users to automate payments or record total expenses. They also foresee specific use cases, like a New Zealand business owner using a digital account with smart contract-based conditional payments to release funds only after fulfilling an order.

New Zealand is still far from launching a CBDC. The current consultation period will conclude on July 26, with options for further consultations. However, Stage 2, which includes the entire design period and a cost-benefit analysis, will continue until 2026.

If it decides to proceed, the Reserve Bank will develop prototypes in Stage 3 between 2028 and 2029 before launching the CBDC in Stage 4 around 2030.