The Reserve Bank of New Zealand (RBNZ) deputy governor and operations head, Geoff Bascand, discussed virtual currencies in a recent speech at the Royal Numismatic Society in Wellington.
He highlighted some of the pros and cons of virtual currencies, lauding their cost-effectiveness for cross-border payments but critical of their high volatility, deflationary nature and low penetration as a payment acceptable to businesses. Most notably though were his comments of their future potential:
“Key attributes of trust, that the ‘money’ gives rise to settlement of the obligation, and anonymity, it is often efficient for the sale/purchase parties not to have to identify one another, must be met, but if these can be accomplished reliably and sustainably new technologies could supplant cash as we know it in years to come.”
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By indicating that Bitcoin can replace cash in the future, his comments are arguably the most pro-Bitcoin by any financial authority discussing the topic. While other authorities have expressed favorable views, and authorities from Isle of Man even went as far as to declare their intent to “provide an environment for high-quality businesses in this rapidly emerging field”, none have explicitly suggested that Bitcoin will take over.
Still, Bascand argued against the increasingly common predictions for the death of cash, calling them “greatly exaggerated”. Even non-electronic forms of cash have seen an uptick in demand in line with GDP growth, despite the heavy penetration of credit/debit usage amongst the New Zealand population. The 280 transactions per year per person is exceeded only by Iceland and Norway.
He also argued that central banks should not feel overwhelmed by the arrival of virtual currencies, and should instead change their roles in line with developments in technology and the public’s needs. Thus, the Reserve Bank is “committed to evolving products and services in line with and in anticipation of future currency demands.”
Last week, an Irish central banker also encouraged authorities to be proactive in preparing for the entry of digital currencies into the mainstream financial system when concluding his talk at the Bitcoin Finance 2014 Conference and Expo in Dublin.