1 00:00:00,280 --> 00:00:02,520 Speaker 1: The information provided in this program is of a general 2 00:00:02,600 --> 00:00:05,320 Speaker 1: nature and is not intended to be personalized financial advice. 3 00:00:05,400 --> 00:00:07,760 Speaker 1: We encourage you to seek appropriate advice from a qualified 4 00:00:07,760 --> 00:00:11,280 Speaker 1: professional to suit your individual circumstances. Central banks around the 5 00:00:11,280 --> 00:00:15,040 Speaker 1: world are considering launching digital currencies. They want to move 6 00:00:15,080 --> 00:00:18,480 Speaker 1: with the future of payments and offer citizens more choice, 7 00:00:18,680 --> 00:00:21,040 Speaker 1: but are they also a means to keep some level 8 00:00:21,079 --> 00:00:23,680 Speaker 1: of control over the monetary system. 9 00:00:23,800 --> 00:00:27,000 Speaker 2: At the moment, the cash system is under serious pressure, 10 00:00:27,200 --> 00:00:29,520 Speaker 2: so that form of central bank money is getting less 11 00:00:29,520 --> 00:00:33,240 Speaker 2: and less. That's kind of a big existential reason that at. 12 00:00:33,120 --> 00:00:47,360 Speaker 3: One end of the spectrum think of it as a 13 00:00:47,479 --> 00:00:50,640 Speaker 3: digital cash, an entirely online. 14 00:00:50,240 --> 00:00:55,200 Speaker 1: Version of the centralized physical money currently issued by central banks. 15 00:00:55,720 --> 00:00:59,680 Speaker 1: Right now, one hundred and thirty four countries representing ninety 16 00:00:59,720 --> 00:01:03,800 Speaker 1: eight of global GDP are exploring the idea of a 17 00:01:03,840 --> 00:01:09,800 Speaker 1: CBDC central bank digital currency. It already exists in the Bahamas, 18 00:01:09,959 --> 00:01:14,440 Speaker 1: Jamaica and Nigeria, with a large scale pilot underway in China. 19 00:01:15,000 --> 00:01:18,080 Speaker 1: The intent, at least in New Zealand, is to provide 20 00:01:18,160 --> 00:01:22,440 Speaker 1: an accessible alternate payment system and move with the times 21 00:01:22,480 --> 00:01:26,200 Speaker 1: where cash isn't as widely used and bank branches are 22 00:01:26,240 --> 00:01:28,920 Speaker 1: harder to come by, but like with any. 23 00:01:28,680 --> 00:01:31,399 Speaker 4: New technology, there are questions to do. 24 00:01:31,440 --> 00:01:35,680 Speaker 1: With privacy and financial stability if it alters the use 25 00:01:35,720 --> 00:01:41,160 Speaker 1: case for intermediaries and depositories such as commercial banks. It's 26 00:01:41,160 --> 00:01:44,360 Speaker 1: not a completely foreign concept. The dollars in our bank 27 00:01:44,360 --> 00:01:47,560 Speaker 1: accounts already show as numbers on a screen, and when 28 00:01:47,600 --> 00:01:51,080 Speaker 1: central banks print money, they do it digitally. It's not 29 00:01:51,120 --> 00:01:55,640 Speaker 1: intended to fully replace physical banknotes and coins, and that's 30 00:01:55,680 --> 00:01:57,360 Speaker 1: where concern may arise. 31 00:01:58,080 --> 00:01:59,720 Speaker 4: Cash and circulation can. 32 00:01:59,560 --> 00:02:03,520 Speaker 1: Be tracked to some degree, but it's typically transacted anonymously. 33 00:02:04,240 --> 00:02:07,360 Speaker 1: So if we shift to a fully digital monetary system, 34 00:02:07,880 --> 00:02:11,320 Speaker 1: could central banks have the keys to oversee and even 35 00:02:11,400 --> 00:02:13,040 Speaker 1: intervene in our spending. 36 00:02:13,600 --> 00:02:14,720 Speaker 4: The US Senate just. 37 00:02:14,720 --> 00:02:19,280 Speaker 1: Passed a bill called the CBDC Anti Surveillance Act ensuring 38 00:02:19,480 --> 00:02:23,120 Speaker 1: that can't happen there. In this interview, I ask a 39 00:02:23,160 --> 00:02:26,720 Speaker 1: Reserve Bank of New Zealand official about the process underway 40 00:02:26,800 --> 00:02:29,000 Speaker 1: to adopt it here, including its. 41 00:02:28,919 --> 00:02:34,000 Speaker 4: Use case and any safeguards. Hi En, thank you so 42 00:02:34,080 --> 00:02:35,440 Speaker 4: much for her time. I appreciate it. 43 00:02:36,080 --> 00:02:37,399 Speaker 2: Welcome, nice to be here. 44 00:02:38,440 --> 00:02:40,919 Speaker 1: I want to go into the use case, the benefits 45 00:02:41,000 --> 00:02:44,959 Speaker 1: and the whole process to potentially adopt a CBDC here. 46 00:02:45,400 --> 00:02:48,520 Speaker 1: But I think the best place to start is just why, 47 00:02:49,040 --> 00:02:52,280 Speaker 1: so why is the Reserve Bank considering adopting a digital 48 00:02:52,320 --> 00:02:55,239 Speaker 1: currency and what issues could it potentially solve. 49 00:02:56,320 --> 00:02:58,280 Speaker 2: Yeah, so there's a few reasons why we're looking at it. 50 00:02:59,440 --> 00:03:03,919 Speaker 2: One of the things is it's really important to think 51 00:03:03,960 --> 00:03:07,000 Speaker 2: about the role of central bank money. Now. At the moment, 52 00:03:07,160 --> 00:03:10,280 Speaker 2: most people the way they access central bank money is 53 00:03:10,320 --> 00:03:13,320 Speaker 2: cash being notes and coins, but central big money plays 54 00:03:13,320 --> 00:03:17,800 Speaker 2: a really important role in the economy. It's a unit 55 00:03:17,840 --> 00:03:21,400 Speaker 2: of account, it's a it's a store of value as well. 56 00:03:21,960 --> 00:03:26,679 Speaker 2: It enables us to operate monetary policy to make sure 57 00:03:26,720 --> 00:03:29,760 Speaker 2: that the interest rates are appropriate for you know, for 58 00:03:30,320 --> 00:03:35,880 Speaker 2: economic settings. At the moment, the cash system is under 59 00:03:35,880 --> 00:03:38,640 Speaker 2: serious pressure, so that form of central bank money is 60 00:03:38,640 --> 00:03:42,840 Speaker 2: getting less and less. At the same time, digitalization is 61 00:03:43,680 --> 00:03:48,000 Speaker 2: growing rapidly, you know, here around the world. So this 62 00:03:48,080 --> 00:03:52,760 Speaker 2: starts to raise some quite big questions around what we 63 00:03:53,040 --> 00:03:56,480 Speaker 2: what we call monetary sovereignty. Right, So that's kind of 64 00:03:56,640 --> 00:03:59,840 Speaker 2: a big existential reason that at one end of the spectrum. 65 00:03:59,880 --> 00:04:03,520 Speaker 2: But then there are other drivers for us. One of 66 00:04:03,560 --> 00:04:05,760 Speaker 2: the drivers is we look at the New Zealand payment 67 00:04:05,800 --> 00:04:09,160 Speaker 2: system and think it's not as efficient or innovator for 68 00:04:09,320 --> 00:04:13,480 Speaker 2: competitive as it could be. That means that New Zealanders 69 00:04:13,520 --> 00:04:17,520 Speaker 2: pay a little bit more for their payment services than 70 00:04:17,560 --> 00:04:20,800 Speaker 2: they could in a more competitive environment. And we actually 71 00:04:20,839 --> 00:04:23,520 Speaker 2: think that a central bank currency or what we're calling 72 00:04:23,560 --> 00:04:25,760 Speaker 2: digital cash can have a bit of an impact. There 73 00:04:26,040 --> 00:04:29,880 Speaker 2: can be a real spur to competition, so that that's 74 00:04:29,920 --> 00:04:34,480 Speaker 2: another driver. We care about people being able to access 75 00:04:34,480 --> 00:04:38,159 Speaker 2: central bank money, and there is a financial inclusion dimension 76 00:04:38,279 --> 00:04:42,520 Speaker 2: to this as well. Not everyone does have access to 77 00:04:42,600 --> 00:04:45,680 Speaker 2: a bank account. At the moment, about six percent of 78 00:04:45,680 --> 00:04:49,280 Speaker 2: New Zealanders wholly reliant on the cash system, but it's 79 00:04:49,279 --> 00:04:52,120 Speaker 2: getting harder and harder for them to access cash. Now 80 00:04:52,120 --> 00:04:54,560 Speaker 2: when we talk about digital currency, one thing we're always 81 00:04:54,560 --> 00:04:57,520 Speaker 2: of pains to say is this is not about replacing cash, 82 00:04:57,760 --> 00:05:01,919 Speaker 2: because people care quite deep about it. It's about making 83 00:05:01,920 --> 00:05:08,200 Speaker 2: sure people have choice in how they transact. So there 84 00:05:08,200 --> 00:05:10,760 Speaker 2: are quite a few drivers for us to be thinking 85 00:05:10,760 --> 00:05:11,159 Speaker 2: about this. 86 00:05:11,520 --> 00:05:14,039 Speaker 1: I want to jump in on your existential factor there. 87 00:05:14,440 --> 00:05:17,000 Speaker 1: This could seem like from the outside looking in, and 88 00:05:17,040 --> 00:05:19,440 Speaker 1: as you sort of alluded to there, that the Reserve 89 00:05:19,520 --> 00:05:23,840 Speaker 1: Bank is through potentially introducing a CBDC trying to give 90 00:05:24,160 --> 00:05:28,159 Speaker 1: CPR to the monetary system that you control and the 91 00:05:28,200 --> 00:05:31,039 Speaker 1: tools that you have. Is this all a means to 92 00:05:31,360 --> 00:05:33,520 Speaker 1: continue central bank relevance? 93 00:05:34,760 --> 00:05:39,400 Speaker 2: Absolutely, you know, when you look at central bank digital currency, 94 00:05:39,440 --> 00:05:41,240 Speaker 2: this is something that all central banks around the world 95 00:05:41,279 --> 00:05:45,440 Speaker 2: are looking at and have quite active research programs. The 96 00:05:45,640 --> 00:05:49,159 Speaker 2: concept of having a digital form of central bank money 97 00:05:49,440 --> 00:05:52,760 Speaker 2: has been around for about twenty years, but it wasn't 98 00:05:52,839 --> 00:05:57,760 Speaker 2: really until you got some big tech players starting to 99 00:05:57,800 --> 00:06:02,440 Speaker 2: talk about global currencies like Facebook's Libra and then d 100 00:06:02,680 --> 00:06:06,960 Speaker 2: M that that the big sort of the G five 101 00:06:07,080 --> 00:06:11,680 Speaker 2: central banks started getting really serious about thinking about what 102 00:06:11,720 --> 00:06:16,520 Speaker 2: does this mean? And so you know, it is it 103 00:06:16,560 --> 00:06:22,320 Speaker 2: is important to be able to maintain monetary sovereignty. It is, 104 00:06:23,360 --> 00:06:25,960 Speaker 2: you know, until we talk about the the ability to 105 00:06:26,000 --> 00:06:28,599 Speaker 2: operate monetary policy and said interest rates. But there are 106 00:06:28,640 --> 00:06:32,440 Speaker 2: also some real efficiency benefits. Anyway, this this unit of 107 00:06:32,480 --> 00:06:35,359 Speaker 2: account sounds like you know, economics one O one what 108 00:06:35,400 --> 00:06:37,240 Speaker 2: you'd read in the textbook, and it kind of is. 109 00:06:37,279 --> 00:06:40,000 Speaker 2: But but you know, if you if you imagine the 110 00:06:40,040 --> 00:06:42,360 Speaker 2: world where central we sort of disappeared and you had, 111 00:06:43,000 --> 00:06:46,039 Speaker 2: you know, the money was replaced by a whole bunch 112 00:06:46,080 --> 00:06:51,479 Speaker 2: of stable coins. They're all called different units or even 113 00:06:51,520 --> 00:06:54,440 Speaker 2: the same unit, but they're actually worth something sort of different. 114 00:06:54,440 --> 00:06:56,799 Speaker 2: This is this is getting back to the pre central 115 00:06:56,839 --> 00:07:00,880 Speaker 2: bank kind of error. So so you know, I don't 116 00:07:00,880 --> 00:07:05,720 Speaker 2: want to sound too dramatic. This is not happening overnight, 117 00:07:06,120 --> 00:07:08,719 Speaker 2: but it takes a long time when you're thinking about 118 00:07:08,760 --> 00:07:13,960 Speaker 2: these sorts of changes in a monetary system. Takes a 119 00:07:13,960 --> 00:07:16,520 Speaker 2: lot of planning, takes a lot of work. So we 120 00:07:16,600 --> 00:07:17,920 Speaker 2: need to be thinking about it now. 121 00:07:18,800 --> 00:07:21,520 Speaker 1: So this is a matter of survivability for the reserve 122 00:07:21,600 --> 00:07:24,280 Speaker 1: bank and central banks the world over. To put it 123 00:07:24,480 --> 00:07:26,360 Speaker 1: not lightly right, Yeah. 124 00:07:26,160 --> 00:07:28,800 Speaker 2: Well, you know, sovereign states tend to have sovereign currencies 125 00:07:28,840 --> 00:07:32,320 Speaker 2: or they group together like the Euro Area. But those 126 00:07:32,400 --> 00:07:36,920 Speaker 2: currencies are meaningful, play an important role and matter. So 127 00:07:38,160 --> 00:07:44,920 Speaker 2: so yes, and even if you don't even if you 128 00:07:44,960 --> 00:07:47,800 Speaker 2: don't engage central bank money directly. You know, one thing 129 00:07:47,840 --> 00:07:50,960 Speaker 2: that I always say is you think about you think 130 00:07:51,040 --> 00:07:54,800 Speaker 2: about what happens how you engage with money, right, or 131 00:07:54,840 --> 00:07:58,640 Speaker 2: anyone engages with money. Your salary goes into your bank account. 132 00:07:59,040 --> 00:08:02,480 Speaker 2: You might use Apple pay or if post or whatever 133 00:08:02,560 --> 00:08:06,840 Speaker 2: to transact. You won't never touch cash, right, And people think, 134 00:08:06,880 --> 00:08:09,520 Speaker 2: well that I have New Zealand dollars in my bank account. 135 00:08:09,520 --> 00:08:11,840 Speaker 2: Well they don't. What they have is an electronic claim 136 00:08:12,280 --> 00:08:15,400 Speaker 2: on a private institution. Now, what happens when there is 137 00:08:15,840 --> 00:08:20,720 Speaker 2: uncertainty in an economy or some concerns about your financial 138 00:08:20,720 --> 00:08:24,240 Speaker 2: institution or what have you. The first thing people do 139 00:08:24,560 --> 00:08:27,400 Speaker 2: they go to the bank and they say, I want cash, 140 00:08:27,520 --> 00:08:30,480 Speaker 2: Because even if they don't think about it in these terms, 141 00:08:30,520 --> 00:08:33,880 Speaker 2: even if they don't think about relative credit risk, intuitively 142 00:08:33,960 --> 00:08:38,520 Speaker 2: they understand it. And so there's that dimension that central 143 00:08:38,520 --> 00:08:42,840 Speaker 2: bank money brings as well. It's the safest form of money, 144 00:08:44,320 --> 00:08:48,240 Speaker 2: so that there are all sorts of reasons why central 145 00:08:48,280 --> 00:08:51,960 Speaker 2: bank money matters that people don't think about. And you 146 00:08:52,000 --> 00:08:57,280 Speaker 2: could think of us as as responding to some external drivers, 147 00:08:57,640 --> 00:09:00,160 Speaker 2: but you can also think about us making sure that 148 00:09:00,200 --> 00:09:03,079 Speaker 2: New Zealanders continue to have choice how they transact. 149 00:09:04,040 --> 00:09:07,480 Speaker 1: Are there also other factors at play, like the Reserve 150 00:09:07,520 --> 00:09:11,520 Speaker 1: Bank doesn't believe that commercial banks are serving consumers well enough, 151 00:09:12,160 --> 00:09:14,880 Speaker 1: or to stop money from going to those big FinTechs 152 00:09:14,880 --> 00:09:17,880 Speaker 1: like you spoke about with Meta or other financial apps 153 00:09:17,960 --> 00:09:21,120 Speaker 1: like wise and revolute that we have here now, or 154 00:09:21,160 --> 00:09:23,680 Speaker 1: is it to try and keep a hold on centralized 155 00:09:23,720 --> 00:09:26,880 Speaker 1: currency to stop people from moving to these other forms 156 00:09:26,880 --> 00:09:30,360 Speaker 1: that you talk about, decentralized currencies like bitcoin. 157 00:09:31,200 --> 00:09:33,560 Speaker 2: Yeah, well, we're not really trying to stop people doing 158 00:09:33,600 --> 00:09:38,679 Speaker 2: anything in a sense. But there's two there is two 159 00:09:38,880 --> 00:09:40,880 Speaker 2: sort of key parts to it. We've talked quite a 160 00:09:40,880 --> 00:09:44,520 Speaker 2: bit about the monthly sovereignty side, but actually one of 161 00:09:44,520 --> 00:09:47,600 Speaker 2: the really big drivers for us is the innovation side 162 00:09:47,640 --> 00:09:50,360 Speaker 2: as well. You know, the New Zealand banking system the 163 00:09:50,360 --> 00:09:55,360 Speaker 2: most profitable banking system in the world on many measures, 164 00:09:56,520 --> 00:10:00,360 Speaker 2: years behind, if not decades behind other countries. Think we're 165 00:10:00,360 --> 00:10:03,360 Speaker 2: the only OECD country that doesn't have a faster payment 166 00:10:03,400 --> 00:10:10,240 Speaker 2: system for example. Now we see digital cash cbdc's as 167 00:10:10,280 --> 00:10:13,840 Speaker 2: being a way to drive competition and efficiency. So you 168 00:10:13,960 --> 00:10:18,920 Speaker 2: mentioned trying to keep people away from stable coins. Well, 169 00:10:19,280 --> 00:10:22,400 Speaker 2: actually that's not really how we see things when we 170 00:10:22,440 --> 00:10:29,079 Speaker 2: talk about the digital cash how it would work. One 171 00:10:29,120 --> 00:10:31,240 Speaker 2: of the things that we always stress is that it 172 00:10:31,320 --> 00:10:34,720 Speaker 2: could be via your bank, so you could log into 173 00:10:34,760 --> 00:10:38,120 Speaker 2: your bank your wallet and you could choose between whichever 174 00:10:38,640 --> 00:10:41,120 Speaker 2: private bank account you want or digital cash, or it 175 00:10:41,120 --> 00:10:44,280 Speaker 2: could be by a wallet provided by a third party 176 00:10:44,320 --> 00:10:49,160 Speaker 2: provider which isn't a bank. And that's an important distinction 177 00:10:49,240 --> 00:10:53,120 Speaker 2: that we're making there unlike some other countries, because we're 178 00:10:53,120 --> 00:10:56,200 Speaker 2: saying we think that that would drive innovation, It will 179 00:10:56,280 --> 00:11:00,600 Speaker 2: drive more efficient, lower cost outcomes for the benefit of 180 00:11:00,600 --> 00:11:03,600 Speaker 2: all constructors. Whether or not you use business dash, you'll 181 00:11:03,640 --> 00:11:04,440 Speaker 2: benefit from it. 182 00:11:05,200 --> 00:11:06,920 Speaker 1: I do want to talk more about how this would 183 00:11:06,960 --> 00:11:10,199 Speaker 1: actually work and how it could be programmed and structured, 184 00:11:10,440 --> 00:11:13,640 Speaker 1: but still just on these factors here. If we do 185 00:11:13,840 --> 00:11:18,160 Speaker 1: just focus on this shift to decentralized currency by some, 186 00:11:18,360 --> 00:11:21,360 Speaker 1: certainly not all. We're not for a fact that investors 187 00:11:21,400 --> 00:11:24,880 Speaker 1: are moving into bitcoin. I've done stories showing that millions 188 00:11:24,880 --> 00:11:27,679 Speaker 1: of dollars of investor money in New Zealand is flowing 189 00:11:27,720 --> 00:11:32,599 Speaker 1: to bitcoin ETFs, bitcoin funds, and also directly to bitcoin holdings. 190 00:11:33,120 --> 00:11:35,679 Speaker 1: The people who are investing in that and purchasing it, 191 00:11:35,920 --> 00:11:38,920 Speaker 1: holding it, or trading it, they tell me that they 192 00:11:39,120 --> 00:11:43,720 Speaker 1: like it because it exists outside of the current monetary system, 193 00:11:44,240 --> 00:11:46,760 Speaker 1: and that they have frankly lost trust or faith in 194 00:11:46,800 --> 00:11:51,080 Speaker 1: the centralized currency and centralized banking system because of reasons 195 00:11:51,200 --> 00:11:55,360 Speaker 1: like inflation which we're all experiencing, which they see really 196 00:11:55,400 --> 00:11:58,800 Speaker 1: as a forced level of theft. So what makes you 197 00:11:58,840 --> 00:12:02,360 Speaker 1: think that if that is happening, people would want to 198 00:12:02,440 --> 00:12:04,200 Speaker 1: use a CBDC at all. 199 00:12:04,559 --> 00:12:07,520 Speaker 2: Yeah. I think when you think about crypto, there's two 200 00:12:08,000 --> 00:12:18,000 Speaker 2: main types. Right. There's there's the bitcoin investment type, vehicle, instrument, 201 00:12:18,120 --> 00:12:20,559 Speaker 2: whatever you want to call it. And that's not what 202 00:12:20,600 --> 00:12:25,679 Speaker 2: we're really focused on now. You know, as a central bank, 203 00:12:25,920 --> 00:12:29,320 Speaker 2: of course you're interested in you know, potentially from wealth 204 00:12:29,320 --> 00:12:32,720 Speaker 2: effects and risks and vulnerabilities from a financial stability perspective, 205 00:12:33,280 --> 00:12:38,200 Speaker 2: but from the money the future of money work that 206 00:12:38,360 --> 00:12:42,840 Speaker 2: I'm involved in, that's not particularly interesting to us. What's 207 00:12:42,920 --> 00:12:45,360 Speaker 2: more interesting is the other part of crypto, which is 208 00:12:45,400 --> 00:12:50,680 Speaker 2: the stable coins, where the attempt there is to make 209 00:12:50,840 --> 00:12:54,960 Speaker 2: a blockchain based form of money that can be used 210 00:12:55,080 --> 00:13:00,600 Speaker 2: in everyday transactions. Now, I draw a real distinction between 211 00:13:00,640 --> 00:13:04,520 Speaker 2: the points I was making earlier around you know, global 212 00:13:04,559 --> 00:13:16,040 Speaker 2: FinTechs spanning multiple countries, you know, undermining sovereign currencies as 213 00:13:16,160 --> 00:13:19,719 Speaker 2: distinct from stable coins in New Zealand transacting in the 214 00:13:19,760 --> 00:13:23,560 Speaker 2: New Zealand dollar possibly back by whatever. But one of 215 00:13:23,600 --> 00:13:25,320 Speaker 2: the things that they could be back by, and the 216 00:13:25,360 --> 00:13:28,040 Speaker 2: most obvious thing for them to be back by, would 217 00:13:28,040 --> 00:13:31,080 Speaker 2: be a form of digital currency. So we're not against 218 00:13:31,760 --> 00:13:37,000 Speaker 2: blockchain based you know innovation. In fact, we think that's 219 00:13:37,240 --> 00:13:39,839 Speaker 2: most likely where most of the innovation will come from. 220 00:13:40,800 --> 00:13:44,240 Speaker 2: So so our work program looks at not just how 221 00:13:44,280 --> 00:13:48,480 Speaker 2: do we make the cash system resilient and available to people, 222 00:13:49,080 --> 00:13:53,160 Speaker 2: how do we make central make money available digital digitally 223 00:13:53,360 --> 00:13:57,000 Speaker 2: through digital cash, but also how do you how do 224 00:13:57,080 --> 00:13:59,679 Speaker 2: you then start to think about private innovation and money 225 00:13:59,720 --> 00:14:02,719 Speaker 2: so you've got a coherent system. So we've also been 226 00:14:02,760 --> 00:14:06,480 Speaker 2: talking about our role for FinTechs. We're not you know, 227 00:14:06,520 --> 00:14:08,720 Speaker 2: there's sort of a spectrum around the world of central 228 00:14:08,760 --> 00:14:12,960 Speaker 2: banks from really leaning into and embracing and wanting their 229 00:14:12,960 --> 00:14:18,960 Speaker 2: countries to be you know, crypto leaders, through to we 230 00:14:19,000 --> 00:14:21,600 Speaker 2: don't like it, we're against it, we're regulating against it. 231 00:14:21,680 --> 00:14:24,480 Speaker 2: We're not in that space. We see an ecosystem where 232 00:14:24,520 --> 00:14:27,120 Speaker 2: FinTechs have got to play a really important role. They'll 233 00:14:27,160 --> 00:14:29,640 Speaker 2: provide a lot of the innovation, a lot of the 234 00:14:29,720 --> 00:14:34,920 Speaker 2: niche products, and a lot of the competition. So there's 235 00:14:34,920 --> 00:14:38,600 Speaker 2: a question there about how do you facilitate an environment 236 00:14:38,640 --> 00:14:42,440 Speaker 2: where they're also trusted. So there are questions for down 237 00:14:42,520 --> 00:14:45,880 Speaker 2: the track around regulation and how that works in a way, 238 00:14:45,880 --> 00:14:48,960 Speaker 2: because money is ultimately all about trust and confidence. 239 00:14:49,560 --> 00:14:52,560 Speaker 1: You mentioned regulation there, and I wonder if this is 240 00:14:52,720 --> 00:14:56,800 Speaker 1: also at all preparation for regulation on other digital assets 241 00:14:57,240 --> 00:15:01,600 Speaker 1: like cryptocurrencies and bitcoin, that the CBDC would kind of 242 00:15:01,640 --> 00:15:03,680 Speaker 1: be the one that everyone has to fall back on. 243 00:15:04,040 --> 00:15:04,920 Speaker 4: Are you thinking about that? 244 00:15:05,880 --> 00:15:09,400 Speaker 2: Well, not on those terms, not in a competitive sense. 245 00:15:09,480 --> 00:15:12,600 Speaker 2: What I mean is, you know, you look at so 246 00:15:12,840 --> 00:15:16,840 Speaker 2: I made this distinction already about investment type crypto and 247 00:15:17,000 --> 00:15:19,400 Speaker 2: payment type crypto, and what we're interested in the payment 248 00:15:19,440 --> 00:15:24,400 Speaker 2: type crypto. It's fair to say that those sort of cryptos, 249 00:15:24,480 --> 00:15:27,440 Speaker 2: the stable coins, have not covered themselves in glory over 250 00:15:27,440 --> 00:15:31,760 Speaker 2: the last several years. There's been claims made about backings 251 00:15:31,800 --> 00:15:35,560 Speaker 2: that don't turn out to be true, all sorts of issues. 252 00:15:35,800 --> 00:15:40,400 Speaker 2: So all we're talking about is providing and we're not 253 00:15:40,440 --> 00:15:43,240 Speaker 2: at the point we were talking about specific regulation. We're 254 00:15:43,280 --> 00:15:48,480 Speaker 2: talking conceptually. At some point for people to have trust 255 00:15:48,520 --> 00:15:52,720 Speaker 2: and confidence in New Zealand forms of stable coin and 256 00:15:52,800 --> 00:15:57,120 Speaker 2: they're currently investing in them, using them, that that's fine, 257 00:15:57,160 --> 00:16:00,360 Speaker 2: but for broader uptake and in due course going to 258 00:16:00,360 --> 00:16:02,760 Speaker 2: need to be some kind of regulatory flaw that is, 259 00:16:02,800 --> 00:16:06,600 Speaker 2: not to regulate who uses what, or to to try 260 00:16:06,640 --> 00:16:10,120 Speaker 2: and push people to central bank digital currency. You know 261 00:16:10,280 --> 00:16:14,280 Speaker 2: many on many levels, it doesn't matter to us who 262 00:16:14,400 --> 00:16:19,960 Speaker 2: uses or how much people use digital cash versus physical cash, 263 00:16:20,040 --> 00:16:24,880 Speaker 2: versus private money. We're interested in choice and good outcomes 264 00:16:24,640 --> 00:16:27,360 Speaker 2: for New Zealanders, not not trying to compete with the 265 00:16:27,440 --> 00:16:30,560 Speaker 2: banks or or the FinTechs. That's that's not the game 266 00:16:30,600 --> 00:16:31,080 Speaker 2: that we're in. 267 00:16:31,960 --> 00:16:34,560 Speaker 1: I know that you're calling it digital cash, but it 268 00:16:34,640 --> 00:16:38,440 Speaker 1: actually is a Reserve Bank of New Zealand issued government 269 00:16:38,560 --> 00:16:40,880 Speaker 1: backed New Zealand dollar stable coin. 270 00:16:41,600 --> 00:16:44,920 Speaker 2: Well that's that's a very good analogy exactly what it 271 00:16:44,920 --> 00:16:47,880 Speaker 2: would would be. I mean, but stable coins tend to 272 00:16:48,360 --> 00:16:51,400 Speaker 2: you know that they're they're backed by something else that 273 00:16:51,640 --> 00:16:57,120 Speaker 2: the digital dollar as a claim on the central bank 274 00:16:57,160 --> 00:16:59,200 Speaker 2: and therefore you know, the government, just like cash is. 275 00:17:00,760 --> 00:17:02,440 Speaker 2: So it's just a that's why we're calling it a 276 00:17:02,560 --> 00:17:04,680 Speaker 2: digital cash. It's a digital form of cash in a way. 277 00:17:05,600 --> 00:17:08,040 Speaker 1: Let's go into how this would work. How would I 278 00:17:08,160 --> 00:17:10,320 Speaker 1: use it and interact with it? How would I be 279 00:17:10,359 --> 00:17:13,119 Speaker 1: able to access my money and spend it as my 280 00:17:13,240 --> 00:17:14,720 Speaker 1: digital cash was held with you. 281 00:17:15,880 --> 00:17:21,000 Speaker 2: Yeah, so we at the moment we're consulting on some 282 00:17:21,119 --> 00:17:23,880 Speaker 2: of the design features that it would have. So they 283 00:17:24,000 --> 00:17:25,920 Speaker 2: just want to preface it by saying, you know, there's 284 00:17:25,920 --> 00:17:27,600 Speaker 2: still a lot of water to go over the bridge. 285 00:17:27,600 --> 00:17:30,960 Speaker 2: In terms of specifically how it will work, but conceptually 286 00:17:31,040 --> 00:17:35,119 Speaker 2: how it would work would be you would access it 287 00:17:35,280 --> 00:17:38,880 Speaker 2: through our third party, so it would not be held 288 00:17:38,880 --> 00:17:40,840 Speaker 2: by the Reserve Bank. And one of the things that 289 00:17:40,920 --> 00:17:43,199 Speaker 2: comes up all the time is concerned about, well, you know, 290 00:17:43,200 --> 00:17:47,040 Speaker 2: why would I use Why would I use central bank 291 00:17:47,080 --> 00:17:48,919 Speaker 2: money a digital form of money. I don't want the 292 00:17:48,920 --> 00:17:51,480 Speaker 2: government knowing what I'm spending my money on. The Part 293 00:17:51,520 --> 00:17:54,119 Speaker 2: of the point here is that the Reserve Bank gets 294 00:17:54,160 --> 00:17:58,120 Speaker 2: no line of sight of the transactions, so where it's 295 00:17:59,240 --> 00:18:04,240 Speaker 2: you would ask through your your bank with your transfer 296 00:18:04,359 --> 00:18:09,640 Speaker 2: money in your wallet provided by your bank, between your 297 00:18:10,440 --> 00:18:15,480 Speaker 2: transaction account into into your digital cash account, or through 298 00:18:15,760 --> 00:18:20,159 Speaker 2: a third another provider of fintech or whoever. How you 299 00:18:20,160 --> 00:18:22,440 Speaker 2: would use it with the you'd look into it into 300 00:18:22,480 --> 00:18:26,600 Speaker 2: a shop. It's a generally available form of digital cash, 301 00:18:27,000 --> 00:18:30,360 Speaker 2: so you would walk into a shop, you would pay 302 00:18:30,400 --> 00:18:33,240 Speaker 2: for something at the point of sale, just like you 303 00:18:33,280 --> 00:18:36,920 Speaker 2: would pulling cash out of your wallet using Apple Pay, 304 00:18:37,520 --> 00:18:40,680 Speaker 2: using f pass, using credit cards. It would just be 305 00:18:40,760 --> 00:18:44,000 Speaker 2: one more choice for you, so there'd be no point 306 00:18:44,000 --> 00:18:47,360 Speaker 2: of difference. There are the main points off the main 307 00:18:47,400 --> 00:18:52,080 Speaker 2: points of difference of course, are the credit rating right 308 00:18:52,720 --> 00:18:55,440 Speaker 2: of the cash that you hold as a higher rating 309 00:18:55,520 --> 00:18:59,160 Speaker 2: than the private sector, and will have some offline functionality, 310 00:19:00,760 --> 00:19:03,520 Speaker 2: so you could use it when the internet's down on 311 00:19:03,640 --> 00:19:06,119 Speaker 2: powers out, you could do peer to peer and it 312 00:19:06,160 --> 00:19:11,600 Speaker 2: would be instant. So there are some design features that 313 00:19:11,720 --> 00:19:15,080 Speaker 2: make it different, but from a practical point of view, 314 00:19:15,400 --> 00:19:19,440 Speaker 2: it's all about choice, you know, and it wouldn't feel 315 00:19:19,440 --> 00:19:23,480 Speaker 2: a look any different to you than how you're currently transacting. 316 00:19:23,920 --> 00:19:26,240 Speaker 1: The difference, though, I'm assuming, would be and where the 317 00:19:26,280 --> 00:19:29,520 Speaker 1: deposit is held, one for one, so that deposit would 318 00:19:29,520 --> 00:19:31,840 Speaker 1: be held by the reserve bank as opposed to with 319 00:19:31,920 --> 00:19:32,800 Speaker 1: a commercial bank. 320 00:19:33,359 --> 00:19:35,159 Speaker 2: So you could think of it. You could think of 321 00:19:35,160 --> 00:19:37,840 Speaker 2: it a bit like us as a wholesaler, just just 322 00:19:37,880 --> 00:19:40,359 Speaker 2: as with the cash system at the moment, you know, 323 00:19:40,400 --> 00:19:47,560 Speaker 2: we get the coins minted, the banknotes printed, and then 324 00:19:47,560 --> 00:19:50,639 Speaker 2: we send them out to a bank and you know, 325 00:19:50,680 --> 00:19:53,919 Speaker 2: you assess it and you hold it. In that sense, 326 00:19:54,760 --> 00:19:57,680 Speaker 2: your money would be held with whatever third party provider 327 00:19:58,960 --> 00:20:01,000 Speaker 2: you chose to access digital cash through. 328 00:20:01,760 --> 00:20:03,959 Speaker 4: Then how would the credit rating be higher? 329 00:20:04,880 --> 00:20:09,280 Speaker 2: Well, because the claim, because I'm talking about the facilitation 330 00:20:09,400 --> 00:20:12,879 Speaker 2: of the wallet, the claim is on the reserve bank 331 00:20:13,840 --> 00:20:17,280 Speaker 2: that's right. So if you held so these are sort 332 00:20:17,280 --> 00:20:18,919 Speaker 2: of fine points of detailed to work through. But in 333 00:20:19,000 --> 00:20:22,560 Speaker 2: terms of if you held money with a third party provider, 334 00:20:22,600 --> 00:20:27,760 Speaker 2: your claim is still on the Reserve Reserve Bank. So 335 00:20:27,800 --> 00:20:29,280 Speaker 2: that's why the credit ratings higher. 336 00:20:29,920 --> 00:20:31,480 Speaker 4: Let's talk about those concerns. 337 00:20:31,760 --> 00:20:34,159 Speaker 1: The Reserve Bank says that it's on material about digital 338 00:20:34,200 --> 00:20:38,520 Speaker 1: cash online that it would be safe and secure and 339 00:20:38,560 --> 00:20:40,119 Speaker 1: as you said that it would be backed by the 340 00:20:40,119 --> 00:20:43,160 Speaker 1: Reserve Bank, So that's on you. But the Reserve Bank 341 00:20:43,200 --> 00:20:46,320 Speaker 1: has been subject to a cyber attack in twenty twenty 342 00:20:46,760 --> 00:20:49,000 Speaker 1: and in the year after that had a data breach, 343 00:20:49,600 --> 00:20:52,720 Speaker 1: and even the big commercial banks can't keep us safe 344 00:20:52,720 --> 00:20:54,480 Speaker 1: from fraud and scams. 345 00:20:55,080 --> 00:20:56,960 Speaker 4: So how was this supposed to do it? 346 00:20:58,440 --> 00:21:02,080 Speaker 2: Yeah, so it's it's a good question. And scams and 347 00:21:02,160 --> 00:21:05,399 Speaker 2: fraud and cyber is, you know, the the topic of 348 00:21:05,400 --> 00:21:07,640 Speaker 2: the day and everyone's leaning into it, I mean, one 349 00:21:07,640 --> 00:21:09,919 Speaker 2: of the things. So we're not at a point where 350 00:21:09,960 --> 00:21:13,520 Speaker 2: we're actually building systems or designing. We're just simply making 351 00:21:13,560 --> 00:21:20,920 Speaker 2: the point that trust is paramount and it will need 352 00:21:20,960 --> 00:21:25,119 Speaker 2: to be extraordinarily secure. No central blanct it's untenable for 353 00:21:25,160 --> 00:21:32,919 Speaker 2: central banks to think about you know there's people losing 354 00:21:32,920 --> 00:21:38,359 Speaker 2: confidence in their money. So I don't really have a 355 00:21:38,400 --> 00:21:40,600 Speaker 2: technical answer for you at this point other than to 356 00:21:40,680 --> 00:21:44,280 Speaker 2: say that we won't be issuing digital cash until we 357 00:21:44,320 --> 00:21:47,479 Speaker 2: are fully confident that it is as secure as it 358 00:21:47,520 --> 00:21:53,960 Speaker 2: can possibly can possibly be. So that involves thinking not 359 00:21:54,040 --> 00:21:56,960 Speaker 2: just about the current environment, the future environment, quantum proof 360 00:21:57,000 --> 00:22:00,560 Speaker 2: and those sorts of things. So so, but there's still 361 00:22:00,600 --> 00:22:02,200 Speaker 2: quite a lot of water to go under the bridge 362 00:22:02,240 --> 00:22:05,399 Speaker 2: until we basically start to set the standards and the 363 00:22:05,400 --> 00:22:09,280 Speaker 2: benchmarks and those kinds of things. We're simply making the 364 00:22:09,359 --> 00:22:14,919 Speaker 2: point that they are extraordinarily important considerations. 365 00:22:15,680 --> 00:22:18,280 Speaker 1: So you're out there saying that it's going to be safe, 366 00:22:18,359 --> 00:22:21,679 Speaker 1: secure and private, but you can't actually be sure of 367 00:22:21,680 --> 00:22:24,679 Speaker 1: that because you haven't programmed the thing yet. So is 368 00:22:24,680 --> 00:22:26,920 Speaker 1: that a bit unfair to be selling it as that 369 00:22:27,000 --> 00:22:29,520 Speaker 1: when it's really just a promise and not a fact. 370 00:22:31,760 --> 00:22:34,199 Speaker 2: I'm not sure we would argue that we're selling it. 371 00:22:34,240 --> 00:22:39,600 Speaker 2: We're talking about a concept design here. So the first 372 00:22:40,560 --> 00:22:43,040 Speaker 2: consultation we did so we said, hey, there's this thing 373 00:22:43,080 --> 00:22:47,320 Speaker 2: called digital cash, what do you think about it? Now, 374 00:22:47,440 --> 00:22:51,080 Speaker 2: for people to really engage on this, they need to 375 00:22:51,640 --> 00:22:54,159 Speaker 2: have a sense of what it is and how it 376 00:22:54,200 --> 00:22:59,640 Speaker 2: will work. So this current consultation, so it's twenty twenty four. Now, 377 00:23:00,400 --> 00:23:03,520 Speaker 2: in this current consultation, we say, here are the sorts 378 00:23:03,560 --> 00:23:06,080 Speaker 2: of design features that we think it would have to 379 00:23:06,119 --> 00:23:08,520 Speaker 2: put more flesh on the bones to make it more concrete. 380 00:23:08,600 --> 00:23:11,400 Speaker 2: So people go, okay, well, if that's what you're talking about, 381 00:23:11,560 --> 00:23:14,400 Speaker 2: this is what it means to me. You know, these 382 00:23:14,400 --> 00:23:16,560 Speaker 2: are the features I like. These are the things that 383 00:23:16,600 --> 00:23:19,720 Speaker 2: you're not talking about that I'd like to see. So 384 00:23:19,760 --> 00:23:21,600 Speaker 2: they get so they get a sense of it. Now 385 00:23:21,600 --> 00:23:25,560 Speaker 2: we're talking about a twenty thirty target date for launch, 386 00:23:26,240 --> 00:23:30,160 Speaker 2: so you know, it's not like we've got a prospect 387 00:23:30,160 --> 00:23:33,080 Speaker 2: this out there. We're saying invest in this thing. We're 388 00:23:33,119 --> 00:23:35,560 Speaker 2: on the corner of the market. We're just saying here's 389 00:23:35,600 --> 00:23:37,800 Speaker 2: how it would look and feel to give people a 390 00:23:37,840 --> 00:23:41,040 Speaker 2: better idea so they can talk about it. And I 391 00:23:41,040 --> 00:23:43,359 Speaker 2: think it's quite reasonable for a central meaning to say 392 00:23:44,000 --> 00:23:48,159 Speaker 2: that security of it is extraordinarily important. Now, how we 393 00:23:48,240 --> 00:23:53,120 Speaker 2: get there? Because it's twenty twenty four, you know, by 394 00:23:53,200 --> 00:23:56,840 Speaker 2: twenty thirty, you would expect that the world would have 395 00:23:56,920 --> 00:24:02,919 Speaker 2: moved into quantum proof cryptology. For example, there will be 396 00:24:03,080 --> 00:24:08,280 Speaker 2: lots of developments and technology around airfield communications and how 397 00:24:08,320 --> 00:24:10,959 Speaker 2: you actually do the offline. I mean, it's all technically 398 00:24:11,040 --> 00:24:14,080 Speaker 2: possible now, but standards will get better and better and 399 00:24:14,119 --> 00:24:17,000 Speaker 2: more and more robust. So I don't think it's unreasonable 400 00:24:17,080 --> 00:24:21,480 Speaker 2: to say, as a concept, these are the sorts of 401 00:24:21,480 --> 00:24:22,879 Speaker 2: features that we think it will have. 402 00:24:23,720 --> 00:24:25,879 Speaker 1: Noting that this is all very much conceptual and you 403 00:24:25,920 --> 00:24:29,000 Speaker 1: haven't sort of programmed any of it yet. But privacy 404 00:24:29,080 --> 00:24:31,920 Speaker 1: is certainly a concern that I'm sure you've even seen 405 00:24:31,960 --> 00:24:35,800 Speaker 1: come through very strongly in the submission so far. So 406 00:24:35,840 --> 00:24:37,600 Speaker 1: I want to pose a few scenarios to you, and 407 00:24:37,640 --> 00:24:40,160 Speaker 1: if you can, please debunk them or tell. 408 00:24:40,000 --> 00:24:41,960 Speaker 4: Me if they are potential risks. 409 00:24:42,520 --> 00:24:44,920 Speaker 1: What if the Reserve Bank just decides one day, if 410 00:24:44,920 --> 00:24:48,639 Speaker 1: there's a global currency crisis and a sharp devaluation and 411 00:24:48,680 --> 00:24:51,920 Speaker 1: our dollar that you say you just cannot take your 412 00:24:51,920 --> 00:24:53,480 Speaker 1: digital cash out today? 413 00:24:54,080 --> 00:24:54,840 Speaker 4: Is that possible? 414 00:24:57,119 --> 00:24:59,320 Speaker 2: Not possible? I don't think in terms of the way 415 00:24:59,359 --> 00:25:02,080 Speaker 2: that we're we're talking about it. So you know, the 416 00:25:02,160 --> 00:25:06,680 Speaker 2: money isn't programmable at our end. We can't put we're 417 00:25:06,680 --> 00:25:09,200 Speaker 2: not we're not going to put any constraints on it. 418 00:25:09,359 --> 00:25:15,760 Speaker 2: Once once it's gone to it's it's like it's it's 419 00:25:15,840 --> 00:25:19,119 Speaker 2: like cash, you know, is the analogy coming back to 420 00:25:19,160 --> 00:25:23,080 Speaker 2: we wanted to be a similar similar to cash, So no, 421 00:25:23,400 --> 00:25:26,320 Speaker 2: I think debunk on on that one. 422 00:25:27,240 --> 00:25:30,480 Speaker 1: But it's not exactly like cash because when you print 423 00:25:30,520 --> 00:25:33,440 Speaker 1: cash and it goes out into circulation, while there are 424 00:25:33,600 --> 00:25:37,440 Speaker 1: tracking numbers on it, it's typically transacted between us anonymously. 425 00:25:37,560 --> 00:25:40,760 Speaker 1: It's not like these chips in it, whereas when something's 426 00:25:40,800 --> 00:25:44,240 Speaker 1: digital you could actually track it. So what's to say 427 00:25:44,240 --> 00:25:47,240 Speaker 1: that you couldn't oversee our spending and intervene. 428 00:25:47,359 --> 00:25:49,080 Speaker 4: What's the safeguard there. 429 00:25:49,440 --> 00:25:54,639 Speaker 2: Well, because because we won't have you know, we we 430 00:25:54,720 --> 00:25:58,199 Speaker 2: won't be the ones that are providing the wallet, so 431 00:25:58,240 --> 00:26:01,439 Speaker 2: we won't see the transactions. I mean, the analogy with 432 00:26:01,560 --> 00:26:05,800 Speaker 2: cash is a good one. And in the sense that cash, 433 00:26:05,880 --> 00:26:09,160 Speaker 2: you're right, Cash is the only truly formed, the only 434 00:26:09,280 --> 00:26:13,480 Speaker 2: truly anonymous form, right, So what we're saying is this 435 00:26:13,560 --> 00:26:16,600 Speaker 2: will be private and by design, the Reserve Bank will 436 00:26:16,640 --> 00:26:20,440 Speaker 2: not get to see how that money is being used. 437 00:26:20,440 --> 00:26:24,320 Speaker 2: So that's a different thing from saying even at the 438 00:26:24,400 --> 00:26:29,080 Speaker 2: moment you leave a digital footprint, at the moment law 439 00:26:29,160 --> 00:26:35,000 Speaker 2: enforcement can can reach reach through when you know court 440 00:26:35,080 --> 00:26:39,960 Speaker 2: orders and all the rest of it. If there's grounds 441 00:26:40,560 --> 00:26:43,240 Speaker 2: for concern, I wouldn't want to imagine that would be 442 00:26:43,320 --> 00:26:45,880 Speaker 2: any different. But that's a different thing from saying we're 443 00:26:45,920 --> 00:26:48,080 Speaker 2: programming the money, we're telling you how to use it, 444 00:26:48,440 --> 00:26:51,439 Speaker 2: we're watching what you're doing. We're saying by design that 445 00:26:51,560 --> 00:26:56,600 Speaker 2: will not happen now. Now, people, we could say that 446 00:26:57,040 --> 00:26:59,159 Speaker 2: over and over, and we've put a paper out along 447 00:26:59,200 --> 00:27:04,600 Speaker 2: with our consultation paper on privacy to talk about how 448 00:27:04,640 --> 00:27:07,320 Speaker 2: we think about it and why it's so important. But 449 00:27:07,440 --> 00:27:11,199 Speaker 2: there is a lot of concern out there around you know, 450 00:27:12,080 --> 00:27:17,720 Speaker 2: in conspiracy theories, around what the government's doing currently, banks track, 451 00:27:18,720 --> 00:27:23,600 Speaker 2: you know, in monitor transactions and look at things as well. 452 00:27:25,320 --> 00:27:29,720 Speaker 2: So in that sense, the third party provider, you know, 453 00:27:30,560 --> 00:27:34,479 Speaker 2: we talk about having really good consumer digital rights and 454 00:27:34,560 --> 00:27:38,720 Speaker 2: protections as part of the sort of contractual arrangements with 455 00:27:38,840 --> 00:27:41,520 Speaker 2: the third party providers that may or may not end 456 00:27:41,600 --> 00:27:44,880 Speaker 2: up being higher than what you're agreeing to with your 457 00:27:44,920 --> 00:27:47,440 Speaker 2: current bank. But again these are things to work through. 458 00:27:48,400 --> 00:27:50,879 Speaker 1: There is a difference though, between it being a commercial 459 00:27:50,920 --> 00:27:54,480 Speaker 1: bank and the state, which, as you mentioned, has law enforcement. 460 00:27:55,040 --> 00:27:57,600 Speaker 1: So would you agree it's a warranted concern if our 461 00:27:57,640 --> 00:27:59,960 Speaker 1: money is going to be more closely linked to state 462 00:28:00,480 --> 00:28:01,640 Speaker 1: than commercial provider. 463 00:28:02,400 --> 00:28:04,080 Speaker 2: Yeah, I can. I can see that. I can see 464 00:28:04,080 --> 00:28:07,520 Speaker 2: the link that people make it and I absolutely don't 465 00:28:07,560 --> 00:28:10,359 Speaker 2: want to say it's not a warrant to concern, But 466 00:28:10,440 --> 00:28:13,359 Speaker 2: then I think it's incumbent on us to make sure 467 00:28:13,400 --> 00:28:17,640 Speaker 2: people understand the protections and the mechanisms and the constraints, 468 00:28:18,680 --> 00:28:22,320 Speaker 2: you know, and the sort of the social contract in 469 00:28:22,359 --> 00:28:28,720 Speaker 2: a way. So yeah, I mean, still water to go 470 00:28:28,720 --> 00:28:31,840 Speaker 2: on the bridge on how these things are actually implemented. 471 00:28:33,280 --> 00:28:38,280 Speaker 2: But in many ways, you know, you can, you can. 472 00:28:38,600 --> 00:28:41,320 Speaker 2: You can make the point about how important privacy is 473 00:28:41,320 --> 00:28:43,840 Speaker 2: to you blue in the face. It's another form of 474 00:28:43,880 --> 00:28:48,680 Speaker 2: trust and confidence. Right, So this is why it's important 475 00:28:48,720 --> 00:28:53,320 Speaker 2: to do privacy by design, to be very transparent about 476 00:28:53,320 --> 00:28:56,560 Speaker 2: how we're thinking about this, and to talk about, you know, 477 00:28:56,600 --> 00:28:59,080 Speaker 2: how we can practice. But ultimately it's people's choice, and 478 00:28:59,120 --> 00:29:01,280 Speaker 2: that's the point we keep making. You don't have to 479 00:29:01,440 --> 00:29:01,840 Speaker 2: use this. 480 00:29:02,640 --> 00:29:06,120 Speaker 1: Let's talk about the financial stability risk. You've spoken a 481 00:29:06,160 --> 00:29:10,760 Speaker 1: bit about third parties, So what as CBDC circumvent banks 482 00:29:10,800 --> 00:29:14,600 Speaker 1: completely and if so, is that not a financial stability risk? 483 00:29:15,280 --> 00:29:21,240 Speaker 2: Yeah, so it could at the margin circumvent banks completely 484 00:29:21,280 --> 00:29:24,200 Speaker 2: in the sense that we've been very clear that the 485 00:29:24,240 --> 00:29:27,040 Speaker 2: third party providers need not be a bank, so by 486 00:29:27,120 --> 00:29:34,280 Speaker 2: definition that is the case. But the analogy that I 487 00:29:34,440 --> 00:29:38,080 Speaker 2: use is it's a bit like you've decided to have 488 00:29:38,080 --> 00:29:42,160 Speaker 2: a party, right and you worry about two things. You 489 00:29:42,240 --> 00:29:45,800 Speaker 2: worry that no one comes to your party, or you 490 00:29:45,880 --> 00:29:48,920 Speaker 2: worry that it gets on social media and you're swamped 491 00:29:49,120 --> 00:29:52,360 Speaker 2: and you have to shut the party down. Now, when 492 00:29:52,400 --> 00:29:55,480 Speaker 2: central banks took about that, typically they talk about distinter mediation, 493 00:29:55,640 --> 00:29:58,800 Speaker 2: so it's a slightly more technical term than my party analogy, 494 00:29:58,960 --> 00:30:01,800 Speaker 2: but it's the same thing you worry. And this is 495 00:30:01,840 --> 00:30:05,920 Speaker 2: what banks themselves worry about, this disintermediation, that that people 496 00:30:07,160 --> 00:30:09,760 Speaker 2: move their money out of the bank and into this 497 00:30:09,920 --> 00:30:14,720 Speaker 2: product and and and that affects their funding base. Now, 498 00:30:14,720 --> 00:30:19,280 Speaker 2: at a conceptual level, sure, at a practical level, I 499 00:30:19,320 --> 00:30:24,200 Speaker 2: think those concerns, we think those concerns are wildly overstated, 500 00:30:24,960 --> 00:30:29,400 Speaker 2: because it's it's not it's unlikely that most people will 501 00:30:29,680 --> 00:30:35,960 Speaker 2: want to use CBDC as their main source of transacting. 502 00:30:36,400 --> 00:30:39,400 Speaker 2: But in any case, part of the subsequent design where 503 00:30:39,480 --> 00:30:42,440 Speaker 2: we need to do is to have the sort of 504 00:30:42,520 --> 00:30:48,720 Speaker 2: checks and balance and design and constraints so that destabilizing 505 00:30:51,000 --> 00:30:55,360 Speaker 2: defunding of banks cannot cannot happen. You know, this is 506 00:30:55,440 --> 00:30:59,560 Speaker 2: not a play to take over private, private money. That's 507 00:30:59,600 --> 00:31:02,040 Speaker 2: the last thing that we want to see. And the 508 00:31:02,080 --> 00:31:05,680 Speaker 2: Reserve Bank is responsible for financial stability. But that's a 509 00:31:05,760 --> 00:31:11,520 Speaker 2: different thing from saying, at the margin, more competition and 510 00:31:11,640 --> 00:31:16,040 Speaker 2: money flowing into third party providers that drives better competitive 511 00:31:16,080 --> 00:31:20,360 Speaker 2: outcomes and some competitive tension into the system is a 512 00:31:20,400 --> 00:31:24,719 Speaker 2: good thing. It's a scale question in many ways, so 513 00:31:24,800 --> 00:31:28,000 Speaker 2: conceptually sure, and that is one of the reasons why 514 00:31:28,040 --> 00:31:32,240 Speaker 2: banks worry. Now. I don't think they worry about the 515 00:31:32,400 --> 00:31:35,719 Speaker 2: armageddon scenario. They don't worry about that, but they do 516 00:31:35,800 --> 00:31:38,600 Speaker 2: worry closer to home, what does it mean for their 517 00:31:38,600 --> 00:31:43,800 Speaker 2: bottom line for profitability. We're being quite clear that we 518 00:31:43,880 --> 00:31:46,920 Speaker 2: think that the payment system in New Zealand could be 519 00:31:46,960 --> 00:31:50,920 Speaker 2: more competitive and more efficient, and therefore that has some 520 00:31:50,960 --> 00:31:52,160 Speaker 2: implications for banks. 521 00:31:52,200 --> 00:31:55,800 Speaker 1: Sure, well, it could if it's stole at least a 522 00:31:55,840 --> 00:31:59,800 Speaker 1: portion of deposits from banks to a third party providers 523 00:31:59,840 --> 00:32:02,960 Speaker 1: that may or may not be bank products. That then 524 00:32:03,200 --> 00:32:07,280 Speaker 1: those banks have less money to lend. So while it 525 00:32:07,320 --> 00:32:09,160 Speaker 1: looks like it would give us all sound like it 526 00:32:09,160 --> 00:32:12,280 Speaker 1: would give us consumers more options. On the face of it, 527 00:32:12,320 --> 00:32:15,880 Speaker 1: in terms of deposits, it could give us fewer options 528 00:32:16,040 --> 00:32:16,640 Speaker 1: on lending. 529 00:32:17,440 --> 00:32:21,760 Speaker 2: So firstly, I wouldn't say people choosing to put their 530 00:32:21,760 --> 00:32:26,120 Speaker 2: money elsewhere is stealing money from the banks. It's slightly 531 00:32:26,160 --> 00:32:32,440 Speaker 2: loaded terminology. But secondly, you know, if you're thinking about 532 00:32:32,480 --> 00:32:36,400 Speaker 2: it from a fintech perspective, banks have scale. It's more 533 00:32:36,640 --> 00:32:41,600 Speaker 2: likely that you'll see innovation being driven by FinTechs partnering 534 00:32:41,720 --> 00:32:44,840 Speaker 2: up with banks to provide functionality or wallets or what 535 00:32:45,000 --> 00:32:49,760 Speaker 2: have you. But in any case, the arguments around competition, 536 00:32:50,880 --> 00:32:55,800 Speaker 2: it need not be a win lose type type thing, 537 00:32:56,000 --> 00:32:59,440 Speaker 2: and it need not mean that you only get this 538 00:32:59,480 --> 00:33:03,920 Speaker 2: competition by the third party providing all the innovation. If 539 00:33:03,960 --> 00:33:08,400 Speaker 2: you've got competition in the system, that should affect the 540 00:33:08,520 --> 00:33:14,440 Speaker 2: overall level of pricing through competitive effects, even even if 541 00:33:14,440 --> 00:33:17,640 Speaker 2: everyone stayed within the banking system, because you know, if 542 00:33:17,640 --> 00:33:22,240 Speaker 2: you're starting to see more product offerings across different banks, 543 00:33:23,000 --> 00:33:28,120 Speaker 2: that that's that's another form of competition, right So so 544 00:33:28,120 --> 00:33:30,280 Speaker 2: so I think the sort of very black and black 545 00:33:30,280 --> 00:33:33,880 Speaker 2: and white arguments here not and I'm not suggesting that 546 00:33:33,880 --> 00:33:35,760 Speaker 2: that you're making, but you do hear it quite often 547 00:33:37,160 --> 00:33:39,800 Speaker 2: that that this is this is some kind of sky 548 00:33:39,880 --> 00:33:45,240 Speaker 2: as falling type scenario we're pretty skeptical of because we 549 00:33:45,280 --> 00:33:47,760 Speaker 2: can design in the kind of the safeguards and the 550 00:33:47,840 --> 00:33:51,320 Speaker 2: checks and balances, you know, around how much money could 551 00:33:51,360 --> 00:33:55,120 Speaker 2: you actually hold a new wallet, those kinds of things. 552 00:33:55,160 --> 00:33:58,880 Speaker 2: No one wants to see financial instability. That's not what 553 00:33:58,880 --> 00:33:59,880 Speaker 2: we're talking about here. 554 00:34:01,120 --> 00:34:03,760 Speaker 1: I'm assuming you've already met with banks and that they 555 00:34:03,800 --> 00:34:07,560 Speaker 1: probably provided submissions in this consultation process. Can you give 556 00:34:07,600 --> 00:34:10,080 Speaker 1: me an early indication as to what they're saying. 557 00:34:10,560 --> 00:34:13,880 Speaker 2: Well, we've been having I guess a dialogue for a 558 00:34:13,920 --> 00:34:16,920 Speaker 2: few years now, because we did our first consultation on 559 00:34:17,840 --> 00:34:22,440 Speaker 2: sedgelan digital currency twenty twenty one, I think, and the 560 00:34:22,520 --> 00:34:26,239 Speaker 2: kind of feedback that we get is or we're a 561 00:34:26,239 --> 00:34:28,759 Speaker 2: bit nervous of this and we don't really like it. 562 00:34:30,760 --> 00:34:34,240 Speaker 2: We're still in the midst of our second consultation doesn't 563 00:34:34,239 --> 00:34:41,319 Speaker 2: close until the twenty sixth, and there have been a 564 00:34:41,320 --> 00:34:44,960 Speaker 2: few questions, clarifying questions from banks, but we're not at 565 00:34:45,000 --> 00:34:48,640 Speaker 2: a point where we've I'm not even sure we've got 566 00:34:48,680 --> 00:34:53,759 Speaker 2: their submissions in quite yet. So it's a bit too 567 00:34:53,800 --> 00:34:56,080 Speaker 2: early in terms of what the banks are saying, but 568 00:34:56,120 --> 00:35:00,520 Speaker 2: I think the the general vibe that we're been talking 569 00:35:00,520 --> 00:35:03,120 Speaker 2: about will be will be present in their submissions. I'm 570 00:35:03,120 --> 00:35:04,160 Speaker 2: sure is. 571 00:35:04,080 --> 00:35:07,480 Speaker 1: That a general positive vibe or in general negative a 572 00:35:08,680 --> 00:35:09,520 Speaker 1: nervous vibe. 573 00:35:10,040 --> 00:35:12,000 Speaker 2: What if what if we at the RB said, well, 574 00:35:12,000 --> 00:35:15,200 Speaker 2: we're not interested in any of this, we're not doing cbdc's, 575 00:35:15,600 --> 00:35:19,200 Speaker 2: we don't care about stable core in regulation, then you're 576 00:35:19,239 --> 00:35:27,120 Speaker 2: looking at a world of you know, volatility, real competition, 577 00:35:28,080 --> 00:35:32,440 Speaker 2: and potentially not just local FinTechs, but global FinTechs coming 578 00:35:32,480 --> 00:35:37,120 Speaker 2: in and potentially eating the bank's lunches. So, you know, 579 00:35:37,200 --> 00:35:41,799 Speaker 2: it's you need to keep in some perspective the role 580 00:35:41,880 --> 00:35:46,480 Speaker 2: that a CBDC will have. We think, as much as anything, 581 00:35:48,000 --> 00:35:51,080 Speaker 2: it's a it should be a welcome development. I think 582 00:35:51,120 --> 00:35:54,560 Speaker 2: once the banks have fought through it enough, I'm quietly 583 00:35:54,560 --> 00:35:58,160 Speaker 2: confident they'll get there. But at the moment, it's it's new, 584 00:35:58,320 --> 00:36:01,120 Speaker 2: and you know, when we talk about it innovation and competition, 585 00:36:01,239 --> 00:36:06,560 Speaker 2: of course, it makes it can make the large incumbents, 586 00:36:06,640 --> 00:36:08,280 Speaker 2: especially a little bit nervous. 587 00:36:08,880 --> 00:36:10,920 Speaker 1: I'm sure you're aware in the US, the passing of 588 00:36:10,920 --> 00:36:15,520 Speaker 1: the CBDC Anti Surveillance Act, it's kind of tue signaling 589 00:36:15,600 --> 00:36:18,440 Speaker 1: slightly because the Fed hasn't actually said that they'll do 590 00:36:18,480 --> 00:36:21,560 Speaker 1: a CBDC like you, and if they did, they would 591 00:36:21,560 --> 00:36:25,279 Speaker 1: probably need congressional approval anyway. But I'm interested in what 592 00:36:25,320 --> 00:36:29,000 Speaker 1: the approval process could or would look like here. Would 593 00:36:29,000 --> 00:36:31,920 Speaker 1: there be a referendum? Would the public get to vote 594 00:36:31,920 --> 00:36:32,520 Speaker 1: in Yale? 595 00:36:32,600 --> 00:36:34,239 Speaker 4: Nay it No. 596 00:36:35,160 --> 00:36:37,920 Speaker 2: I wouldn't think we'd be going now that route. I mean, 597 00:36:37,960 --> 00:36:41,640 Speaker 2: I think what we have said is our ability to 598 00:36:41,719 --> 00:36:48,279 Speaker 2: issue banknotes and coins is in our legislation, and there 599 00:36:48,280 --> 00:36:52,320 Speaker 2: are concepts around legal tender. For example, we currently actually 600 00:36:52,360 --> 00:36:54,719 Speaker 2: issue a digital form of New Zealand currency and have 601 00:36:54,840 --> 00:37:00,560 Speaker 2: done for decades as part of our as part of 602 00:37:00,600 --> 00:37:08,080 Speaker 2: our assess accounts that we use to operate monetary minilatary policy. 603 00:37:08,280 --> 00:37:11,320 Speaker 2: But having said that, so we're not saying that we 604 00:37:11,719 --> 00:37:15,880 Speaker 2: can currently we can currently do this. What we're saying 605 00:37:16,040 --> 00:37:19,359 Speaker 2: is we think the nature of this is something that 606 00:37:20,200 --> 00:37:22,799 Speaker 2: it's going to involve lots and lots of public consultation, 607 00:37:23,280 --> 00:37:27,560 Speaker 2: and it's almost certainly going to involve new legislation, so 608 00:37:27,600 --> 00:37:31,400 Speaker 2: there will be a parliamentary process around, you know, support 609 00:37:31,440 --> 00:37:34,279 Speaker 2: of this. It's not the sort of thing that the 610 00:37:34,320 --> 00:37:37,880 Speaker 2: Reserve Bank will suddenly just start issuing by ourself, and 611 00:37:37,920 --> 00:37:41,480 Speaker 2: I think there will be a lot of debate. I 612 00:37:41,480 --> 00:37:46,319 Speaker 2: don't know quite what the mechanism or the approach will be, 613 00:37:46,400 --> 00:37:48,440 Speaker 2: but there will be a lot of debate about protections 614 00:37:48,480 --> 00:37:50,879 Speaker 2: and surveillance and privacy and all those sorts of things, 615 00:37:50,920 --> 00:37:51,600 Speaker 2: as there should be. 616 00:37:52,040 --> 00:37:54,319 Speaker 1: Well, I'm glad that it's starting here, and I really 617 00:37:54,360 --> 00:37:56,879 Speaker 1: do appreciate your time. I just wanted to end on 618 00:37:56,880 --> 00:38:00,600 Speaker 1: one question, and it's one that is often asked of 619 00:38:00,719 --> 00:38:04,719 Speaker 1: tech entrepreneurs who, through their products, especially like AI at 620 00:38:04,760 --> 00:38:07,560 Speaker 1: the moment, want to capture more of our money and 621 00:38:07,680 --> 00:38:11,360 Speaker 1: our economic output. So I'll ask you what Sam Oltman 622 00:38:11,719 --> 00:38:13,000 Speaker 1: has been asked before. 623 00:38:13,520 --> 00:38:14,839 Speaker 4: Why should we trust you? 624 00:38:16,320 --> 00:38:20,120 Speaker 2: Why should you trust us? Well? As an institution, we've 625 00:38:20,160 --> 00:38:23,560 Speaker 2: been issuing money that people have trust and confidence in 626 00:38:23,680 --> 00:38:28,000 Speaker 2: since nineteen thirty four, and you know we have a 627 00:38:28,040 --> 00:38:31,080 Speaker 2: public policy purpose and it's laid out in our Act. 628 00:38:31,320 --> 00:38:36,640 Speaker 2: And you know, everything we do, whether it's thinking about 629 00:38:36,680 --> 00:38:42,920 Speaker 2: the cash system, whether it's thinking about crypto, you know 630 00:38:43,040 --> 00:38:46,000 Speaker 2: it's all grounded in meeting the needs of the New 631 00:38:46,080 --> 00:38:48,640 Speaker 2: Zealand public. It's not grounded in a profit motive. 632 00:38:49,560 --> 00:38:51,760 Speaker 4: Thank you, Ian, it was nice to chat to you. 633 00:38:51,760 --> 00:39:00,000 Speaker 2: You're welcome, nice to talk to you.