RBNZ explores cryptocurrencies, no major threats detected

The Reserve Bank of New Zealand issued an educational paper devoted to cryptocurrency. Regulator explains the basics of the digital assets, suggesting that virtual money can be used as a unit of account, medium of exchange and store of value. RBNZ discusses the possibility of digital money issued by central bank, though neither supportive views or plans to issue one are articulated. 

"No central bank has issued a crypto-currency. However, the Bank of Canada and Monetary Authority of Singapore have (separately) experimented with using a crypto-currency for interbank settlement in a test environment. The crypto-currencies in these test environments were backed by a pool of national currency to ensure a par value with cash," the paper reads.

In November 2017 RBNZ published analytical note called "Crypto-currencies – An introduction to not-so-funny moneys" where the central bank expressed rather a skeptical position towards digital assets. 

"We conclude that all crypto-currencies are experimental in nature and users face material risks by transacting with them or by holding significant crypto-currency balances. Individual cryptocurrencies may be more Betamax than VHS, and more MySpace than Facebook. Even if some of the constructs are enduring, such as distributed ledgers and the use of cryptography, specific cryptocurrencies may be supplanted by competing transaction technologies," the authors of the paper concluded.

All in all, New Zealand is moving with the general trend of cautiously skeptical, but not totally restrictive approach. While cryptocurrencies may be used to facilitate illegal activities due to their anonymous nature,they do not bear significant risks to the financial system.