Reserve Bank of New Zealand issues cash system safeguarding consultation

The Reserve Bank of New Zealand (RBNZ) has issued a consultation seeking feedback on challenges facing the country’s cash system and the options to maintain it.

According to Regulation Asia, the consultation outlines a range of external factors that could lead to significant resilience issues for the cash system if left unchecked – including the increasing appeal of non-cash and online payment options, as well as the reducing number of ATMs and bank branches. The challenge of cutting the system’s carbon footprint and facilitate AML compliance is also key.

The RBNZ has outlined it is considering potential routes such as consolidating public and private cash sector functions into one or more public utilities, as well having banks pay merchants that provide cash-out services on their behalf.

Other options include requiring merchants and government agencies to accept cash and requiring banks to provide cash services. In total, the consultation sets out 16 possible policy responses that could help in preserving New Zealand’s cash system.

The RBNZ is also seeking feedback in the consultation on the potential for a central bank digital currency to be issued in tandem with cash, alongside the opportunities and challenges that come with it. From the feedback, the RBNZ will conduct a ‘detailed design and scenario analysis’ to help understand the performance and impact of differing CBDC designs and how risks could be dealt with.

RBNZ assistant governor Christian Hawkesby said, “Falling cash use for everyday needs and the retreat from cash services by banks and retailers threaten financial and social inclusion for some, and have the potential to undermine the important role cash provides under-pinning confidence in private money in bank accounts.”

The consultation is open for comment until 7 March 2022, with the RBNZ planning to release a summary of the submissions received before the end of April 2022.

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