New Zealand central banker: Bitcoin can replace cash in future

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 Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term but critical of their high Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term, 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."

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.