Coins as Important as Clean Water

“As important to the whole population as access to clean water” is the way one individual responded to a recent Reserve Bank of New Zealand survey of the attitude of the bank’s constituents towards using physical cash rather than digital currency.

While this is only one person’s opinion, the results of the study through which 6,882 individuals responded was overwhelming. About 92 percent of those who responded said they preferred cash to digital currency.

The RBNZ is considering a central bank digital currency for ‘Aotearoa,’ the Maori language name for New Zealand. The key here is a “well functioning cash system.” As the April 30 issue of website, The SpinOff put it, “The majority of respondents supported having a well-functioning cash system, with some saying access to cash is a basic human right.”

A second key is the privacy using cash gives respondents. People in New Zealand appear, at least from the study, to feel more comfortable with coins and bank notes in their wallets.

The central bank is concerned about the future of its money. During the height of the Covid 19 pandemic there was a “significant and steady reduction” in the use of physical cash, according to banking information.

During 2019 a mere 13 percent of all financial transactions involved using cash, according to the Household Economic Survey. As the pandemic progressed so did the bank’s anticipation of the amount of coins and bank notes being used would continue to decline. While data on this was not immediately available the central bank did begin to survey its customers to determine if a Central Bank Digital Currency electronic form of central bank money might perform better than do coins and bank notes. CBDC is issued by a central bank, however anyone holding CBDC has a legal claim on the government regardless of if they have a bank account in which to use it.

CBDC assets are a cryptocurrency. CBDC assets are centralized. Users’ transactions are not anonymous. It is meant to be a replacement for cash, however information on the CBDC user is attached to the asset.

CBDC isn’t new. According to the Atlantic Council, there are 24 countries currently using this currency on an introductory level, with an additional 63 countries taking it under serious consideration. A CBDC is usually carried in a digital wallet on a telephone or on a payment card.

RBNZ Governor Adrian Orr is looking forward, but cautiously. Earlier this year he warned the domestic cash system and money was at a crossroad and that he was looking at how to build a sustainable future. According to Orr, “We must decide how best to use digital technology to modernize central bank money, while we continue to ensure cash remains an option for those who need it.”

Those responding to the survey said they were concerned with the loss of privacy should cash go entirely digital. Others said they saw such a move as being an intrusion to their individuality by government because of the CBDC’s “supposed connections with government and the potential for overreach.”

There are plenty of concerns that were brought forward by the survey. Cybersecurity, hacking, and data theft were all voiced by respondents. Questions were raised regarding the impact of the CBDC on individuals who don’t use bank accounts.

The central bank’s response to all this has been to expeditiously develop options to redesign the cash system, while taking a comprehensive approach to consider different options.”

There were also public concerns about the risks of cybersecurity and hacking/data theft, as well as the harm that would arise if cash became less available, especially for the vulnerable.

RBNZ Director of Money and Cash Ian Woolford apparently got the message. Woolford said, “We will continue to explore this through further policy, research, experimentation, and proof-of-concept work.”