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A consultation on central bank digital currency (CBDC) has provoked more responses than any consultation in New Zealand’s history, as the public voices its concern over privacy and surveillance risks.

Last week, the Reserve Bank of New Zealand published a  to its second consultation on CBDC, which was open for public comment from April to July this year.

The consultation received more than 18,000 responses to its online survey, plus more than 500 written responses from businesses, organisations and individuals.

This year’s consultation received three times more responses than the Reserve Bank’s first consultation on CBDC, which was carried out in 2021.

The 2024 survey found that members of the public were opposed to CBDC primarily on privacy and surveillance grounds.

Among those who completed the survey, 90 percent of respondents said that one of their biggest concerns is that “the government may use digital cash to monitor or control my spending”.

A further 70 percent of written submissions also identified potential surveillance as their biggest concern.

Source: Reserve Bank of New Zealand

In response, the Reserve Bank said it “agrees” that privacy is an important consideration, and that it “remains committed” to a privacy-centric design for a potential CBDC.

In second place, 83 percent of respondents expressed concern that issuance of a CBDC “could make it harder for me to access physical cash”.

Again, this concern was shared by 70 percent of written submissions.

In third place, more than 70 percent of survey respondents said that one of their biggest concerns is that they “don’t trust the Reserve Bank to issue digital cash”.

Addressing privacy concerns is key

The Reserve Bank noted that fear of government control was the main common denominator among respondents who expressed opposition to CBDC.

These fears were not necessarily exclusive to CBDC, the bank added, and for many respondents, could be attributed to a wider loss in trust of public institutions.

“For some written submissions, this was often linked to experiences during the COVID-19 pandemic, or perceived or real events in other jurisdictions,” it said.

“Other respondents were forthright in their distrust of the Reserve Bank, often conflating it with the government.”

Going forward, the Reserve Bank said its near-term research agenda will focus on addressing the public’s concerns around privacy and autonomy.

The bank intends to look at a wide range of instruments to protect privacy when using CBDC, including legislative and technological means.

Similarly, the Reserve Bank gave assurances that “the future of money in New Zealand includes cash”.

It noted that, in 2025, trials of its new  will launch in nine areas, and will run for a period of at least 12 months.

Each community taking part in the trials has a population of between 1,000 and 10,000 people, and has lost most or all of its bank-provided counter and cash services.

Under the proposed model, retailers will instead be compensated for offering free cash-out services to customers in these areas.

Additionally, the Reserve Bank said it is studying potential solutions to ensure that a retail CBDC could be easily integrated with physical cash.

These include, for example, methods for enabling low- or no-cost conversions of CBDC to cash and vice versa.

Banks, FIs question need for retail CBDC

Banks and financial institutions (FIs) that responded to the consultation were “generally supportive” of the Reserve Bank’s exploration of CBDC, but questioned the need for a retail CBDC.

Instead, these respondents identified significant opportunities in wholesale CBDC, including the potential for faster, cheaper and more efficient cross-border payments.

Some respondents pointed to other jurisdictions, such as Australia, where research into retail CBDC has been side-lined in favour of wholesale CBDC.

Others questioned the need for the Reserve Bank to invest in exploring CBDC while other payment system upgrades and innovations are ongoing.

For example, Payments NZ is currently leading the development of a comprehensive real-time payments system.

In July 2023, the Reserve Bank  New Zealand's lack of real-time payments as an indication that the country’s payment system had “fallen behind” its peer competitors.

Currently, as  by Robbie Taylor, manager of money and cash policy at the Reserve Bank, New Zealanders can only make real-time payments when transacting with other accounts within the same bank.

At the same time, Payments NZ is also leading on the development and implementation of an open banking framework, while , similar to that of Australia, is currently making its way through parliament.

Further CBDC work to come

In 2025-26, the Reserve Bank said it will conduct further design work, policy development and cost-benefit analyses on a potential CBDC issuance.

Following these projects, it will seek feedback and direction from the government on whether to proceed with a formal proposal for a CBDC.

It would then be up to the government to consider the matter and to draft legislation, if it believes that issuing a CBDC is right for New Zealand.