This is a guide for Kiwi Bitcoiners on the Reserve Bank of New Zealand’s request for feedback on their issues paper - The Future of Money - Private Innovation / Te Moni Anamata - Te Auahatanga. What it’s about, a condensed version of the paper, what you have to do and some handy resources.
What’s this all about?
The Reserve Bank of New Zealand have released an issues paper about the future of money in New Zealand, and they’re asking the public for feedback. The paper was released to the public on 7 December 2023, and is open for submissions until 3 April 2023. It’s all about how to regulate new forms of Private Money, with specific reference to Bitcoin, Crypto Currencies, Stablecoins and more.
About the Issues Paper - The Future of Money - Private Innovation
The paper has six sections and covers the RBNZ’s objectives, approach, focuses and scope for the development and proposed regulation of Private Money in New Zealand. They go into specific detail on opportunities for competition, innovation, risks and explain their current proposed response.
An introduction to the paper with supporting information is available on the RBNZ website here.
How can I make a submission?
If you want to make a submission, start by reading the condensed version of the paper here, start making some notes and putting your responses to the 10 questions together. You need to get your submission in by 3 April 2023.
If you’re one of those people that always whinge about how the government is always so useless and doing the wrong thing, here’s your chance to give them a steer. Will they listen? We have no idea but if we don’t let our opinions known we have no-one to blame but ourselves.
You can email your submission to futureofmoney@rbnz.govt.nz
A postal address is also available on the RBNZ website.
Kiwi Bitcoin Legend Rob Clarkson has even gotten off his arse and summarized it for you, so start here.
The Future of Money - Private Innovation (a condensed version)
Our high-level stewardship objective is that New Zealand has reliable and efficient money and payments systems that support innovation and inclusion.
The ultimate question the Reserve Bank is asking; To respond to the emergence of new forms of money, what additional regulatory powers may be needed that appropriately balance risks and opportunities?
2. Stewardship of Money
The reserve bank are the stewards of money
Private money is any money not issued directly by us including the money in your bank account.
We’re seeking feedback on the opportunities & risks of private money, how this might affect us and our role, and what regulatory response we should propose.
Competition and choice in private money is good.
Private money currently has a high level of trust.
Same risk, same regulation, there should be a level playing field between different forms of private money.
A ‘buyer beware’ approach to (the risks of) private money is insufficient.
New non NZD denominated money could undermine the reserve bank’s monetary sovereignty, and stop us doing our job properly..
Central bank money must remain relevant as a medium of exchange, allowing us to determine monetary policy and provide financial assistance to financial services that are in trouble.
Questions
1. Do you agree with the core drivers, assumptions and high-level approaches that we have described in relation to our work on private innovation in money?
2. Is there anything else we should consider?
3. What is captured by our stewardship interests We are interested in whatever may be used as money in practice.
If any other form of money gains traction it might prevent us doing our job properly. Uptake of Bitcoin / Crypto is low but may increase over time.
We see the management of private money using current AML/KYC/CFT as a precondition for widespread use of private money.
The Reserve Bank is responsible for protecting and promoting the stability of New Zealand’s financial system.
Questions
3. What do you see as the biggest issues with private innovation in money?
4. Do you agree with how we frame the focus on stablecoins? Are there other forms of innovations we should be looking at?
4. Opportunities for greater competition and further innovation Banks provide a uniform standard of trust.
Using non NZD money for day to day transactions adds costs and complexities as the people using this money will have to go through exchangers to obtain NZD.
Without being denominated in NZD private money will lose efficiency.
Private money denominated in NZD supports choice and inclusion, it prevents larger banks dominating smaller ones.
Regulation can support trust in other providers of money.
There are high barriers to entry into the banking system. These barriers are there for a reason, but they prevent competition.
A more open system could improve competition.
Without safe innovation opportunities for better competition and innovation will be lost.
We dont believe that Bitcoin / Crypto payment solutions will always outperform regular payment systems over speed, scalability, convenience or cost.
If we use blockchain in ways that are not anonymous this could have better performance and features.
Scalability, security and decentralization are all tradeoffs in crypto solutions.
Open banking is already afoot and might provide some integration benefits.
Questions
5. Do you agree that there is a significant opportunity to enhance competition and further innovation in a New Zealand context?
5. Risks with private innovation in money
Private innovation in money poses a range of risks.
Risk to the holders,
- Preventing money laundering, cyber attacks, value stability, redemption, solvency.
Risk to competition,
- Big tech could use their network effects to take over.
Risk to trust in money
- Unknown fees, no accountability, custody problems, decentralized uncertainty, ownership uncertainty.
Risk to RB monetary sovereignty.
- Increased use of USD stablecoin could undermine RB money policy, as they could not change the value of the NZD to help the NZ economy.
- Use of a USD stablecoin means that RB intervention effects into the economy would be reduced and ‘unevenly borne’.
- NZD backed stablecoin would prevent some of these issues.
Questions
6. Do you agree with the key risks to the stewardship of money identified here?
7. Are there any other risks that we should consider? How significant are they?
6. The Reserve Bank’s proposed response
The Reserve Bank’s proposed response: we should have options now for dealing with private money issues and change these when necessary.
We will monitor increasing adoption of alternative private money. We will also monitor non-economic factors such as remittance. We may also monitor the technology such as exchanges, financial services, wallets, and blockchains.
If new money becomes more widely used, the wider ecosystem will need to support “the core services” to achieve the RB’s money goals.
The ‘same-risk same-regulation’ principle means that, all else being equal, no change in the regulatory approach may be required. But all else is not equal.
Bank regulation works and could be used to add more “safe choices” for NZ.
DAOs have far reaching implications beyond the money system, but must be addressed. There is no legal framework that provides certainty about DAOs.
Challenges in regulating online cross border activities are not new. A regulatory regime targeting harmful digital communications has been in place since the Christchurch tragedy.
We might also target regulations at crypto on/off ramps. With this we could “crowd out” harmful innovation.
Questions
8. Do you agree with our proposed monitoring approach? Is there anything else we should monitor?
9. Do you agree that we should be open to alternative models of money? Can they work in a New Zealand context?
7. Conclusion
We need to monitor and have balanced regulation.
We are open to new forms of money.
We will provide regulatory certainty, embedding regulatory safeguards in innovations allows individuals and society to benefit with reduced harms.
With your feedback we will consider whether additional legislation and powers are needed and what that would look like.
Questions
10. What issues do you think we should prioritize in developing further regulatory response? For example, should we prioritize issues about the rights of stablecoin holders, or the use of DAOs, or something else?
Next Steps & Resources
The Reserve Bank intend to publish a summary of responses to the Issues Paper by mid 2023. From there they will use this information to formulate their regulatory response.
An intro to the issues Paper on YouTube (Yes the RBNZ has a YouTube channel)
Download the full Issues Paper
Join the conversation with other Kiwi Bitcoiners discussing the paper on Telegram
OK it’s over to you now Kiwi Bitcoiners, what are you going to do?