Geoff Bascand, deputy governor and head of operations at the Reserve Bank of New Zealand (RBNZ) has said that digital currencies could one day evolve to supplant cash as we know it.
In a recent speech delivered to the Royal Numismatic Society in Wellington over the weekend, Bascand described digital currencies as a “challenge to the form and provenance” of money.
He outlined a number of advantages associated with digital currencies, along with the more or less usual list of concerns and risks.
Advantages and drawbacks
Bascand said digital currencies like bitcoin were created as an alternative means of payment and store of value, adding:
“[Bitcoin] is a very low cost payment method with strong security features and usable for cross-border transactions, making it advantageous in some regards relative to more traditional payment mechanisms.”
However, he also noted that cryptocurrencies still have a number of drawbacks, with few businesses accepting them as a form of payment and price volatility remaining a concern.
Bascand went to on explain how, if certain conditions are met, digital currencies could replace normal money:
“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.”
Banks need to keep up
Bascand argued that central banks do not need to be overwhelmed by such innovations. Instead, they need to keep track of developments in the field and develop their regulatory and currency operations roles accordingly.
In this way, he said, they will manage to keep up with developments in technology and the evolving needs of the public.
Both the Reserve Bank of New Zealand and the Reserve Bank of Australia issued digital currency warnings late last year. Apart from the carefully worded statement, regulators have taken any measures to curb or control the development of the bitcoin economy in the region.
Australia's bitcoin business scene in particular seems to be thriving, and one company even launched on its stock exchange in June.