Reserve Bank considers digital dollar

New Zealand could be using a government-backed digital currency by the end of the decade.

The Reserve Bank has opened a round of public consultation on the move towards a digital dollar, which would circulate alongside physical notes and coins.

Director of money and cash Ian Woolford said it offered the public another means of buying goods and services, but would bring efficiency, innovation and competition to the financial system.

“It would be the first digital form of New Zealand currency backed by the Government and available to the public. Physical cash in banknotes and coins would still be available, so people would have the option to use either digital or physical cash.

“You would likely need a digital wallet, payment card or phone app to access your digital cash. You wouldn't need a commercial bank account to use it.’’

Woolford said the financial sector was changing and challenging the country's monetary system with the development of cryptoassets, digital currencies from global companies, smart contracts and distributed ledgers.

“New Zealand's money must innovate to stay relevant and useful and ensure our monetary sovereignty.”

He said digital cash would be mainly used for payments by individuals and businesses, to pay online or in store. It could even be used for children’s pocket money in the same way as cash was currently used.