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Reserve Bank Assistant Governor Karen Silk raises the possibility of cryptocurrency regulation, in part so it doesn't 'undermine our monetary sovereignty'

Banking / news
Reserve Bank Assistant Governor Karen Silk raises the possibility of cryptocurrency regulation, in part so it doesn't 'undermine our monetary sovereignty'
[updated]
thepoint2022

By Matt Skinner & Gareth Vaughan

The Reserve Bank will publish a consultation paper in December looking at the possibility of regulating private crypto-assets, or cryptocurrencies, Reserve Bank Assistant Governor and General Manager for Economics, Financial Markets and Banking Karen Silk says.

Speaking at Payments NZ's “The Point” conference in Auckland, Silk highlighted technology-driven innovation in new forms of money and the potential entry of "Big Tech" companies.

"Such innovations may deliver money or payments instruments more efficiently and at lower cost, and could serve niche use-cases that are not commercially viable or strategic fits for banks," Silk said.

"There are also potentially significant risks to consumers arising from some of this innovation, and gaps exist in regulatory tool kits to address these. From our perspective as a central bank, it is important that new forms of money, whatever their size: reinforce trust in our money, neither reduce competition nor the reliability and efficiency of our money and payments system, and that they don’t undermine our monetary sovereignty."

"The time is right for us to ask what, if any, additional regulatory powers are needed to appropriately balance the risks and opportunities, and to provide regulatory certainty in support of beneficial innovation. It is also important to understand how we can meet cross-cutting challenges of existing regulation, such as AML/CFT [anti-money laundering and countering the financing of terrorism] issues, in a consistent and holistic manner," said Silk.

"Today we have published a paper describing the current state of the New Zealand payments system, and will publish another early next month consulting through until March 2023 on the potential need to regulate private crypto-assets."

This will be an issues paper on private innovations in money, Silk said.

CBDC work continues

Silk also said the Reserve Bank continues to explore the potential introduction of a Central Bank Digital Currency, or CBDC. A CBDC is the digital form of a country’s fiat currency. That means a Reserve Bank issued CBDC, like the physical New Zealand dollar, would be a liability of the Reserve Bank, backed essentially by trust in the Government and its institutions. 

"We have now embarked on the second stage of our CBDC exploration. In this phase, we are expanding beyond the desktop research to explore various aspects to design of a potential CBDC. We are undertaking thematic research on how a CBDC might support wider digital financial inclusion and wellbeing, and also enable an open, innovative and competitive payments ecosystem whilst maintaining user privacy. Alongside our thematic CBDC research we will be undertaking proof of concept experiments to better understand what is possible and feasible," Silk said.

"We will continue to engage with stakeholders across the payment system and society as we investigate a CBDC."

(There's more on CBDCs in this episode of our Of Interest podcast with Reserve Bank Director of Money and Cash Ian Woolford).

'An outlier amongst OECD countries'

Silk also criticised the slowness of the development of digital payments in NZ through the likes of open banking.

"Once fully implemented, open banking has the potential to support innovation and inclusion by opening up consented access to both existing payments capabilities and to the customer’s financial data. Whilst digital innovation is beginning to occur both on top of, and in competition with, traditional payment rails we do not yet have scalable electronic, instant, peer-to-peer payments, and our lack of real time systems for retail payments positions us as an outlier amongst OECD countries."

"This slow pace of implementing promising developments is an issue for our economy, because we could become more digitally competitive, including by nurturing our home-grown fintechs in this space. And as a society, we may see significant benefit through increased domestic competition and efficiency savings in the payment space and in the wider financial system," Silk said

Open banking should give customers greater access to and control over their own banking data, and require banks to give competing third parties access to their systems.

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43 Comments

So, when is the RBNZ going to push/force NZ banks to enable open banking in NZ?  The Aussie banks do it in Aussie, but don't offer it here.  Why not?

Here's the CEO of one of those fintech companies explaining how slow the banks are in NZ to move and the implications for innovation in this country.

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And here's Sam Stubbs making the same point about banks delaying introduction of open banking.

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Just wait.....unless they are completely stupid the Govt will announce it soon as some sort of' bringing the banks to account' sort of thing. 

And they will get great political positives from doing so.

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Reserve Bank Assistant Governor Karen Silk raises the possibility of cryptocurrency regulation, in part so it doesn't 'undermine our monetary sovereignty'

Okay, and how much should we expect CBDCs to undermine our individual sovereignty?

That's a rhetorical question of course, but while we're on the subject, let's stop pretending that the decision to implement a CBDC hasn't already been made. All this noise about "exploring potential", "engaging stakeholders", "calling for public submissions", "consulting iwi", and so on is instantly recognisable as a page straight out of the PR playbook, an attempt to soften the public up to something which has already been decided behind closed doors (Three Waters being another pertinent example).

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So long as a CBDC is tied to the value of the countries fiat currency I see no problem. However seeing El Salvador's Bitcoin disaster, regulation in that type of currency should happen.

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El Salvador a disaster? Not sure if that's correct, we are doing so much better. Time Will tell I guess. At least they give it a go. 

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Your worried about an unrealized $50m loss on a long term asset, but ignoring the following:

EL SALVADOR 🇸🇻  2021:
🟢GDP +10.3%
🟢Tourism income +52%
🟢Employment +7%
🟢New businesses +12%
🟢Exports +17%
🟢Energy generation +19% 
🟢Energy exports +3,291%
🟢Internal revenue +37% (without tax increases)

2022 Crime & Murder rate DOWN 95%

$28billion GDP grew by 10% so a top line up 2.8b multiplied by a tax rate of say 20% (low) so tax revenues up $560m

 

Stop reading the shit the main stream media puts out mate. 

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2022 Crime & Murder rate DOWN 95%

Solution to NZ's gang problem? Buy bitcoin!

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Any source for your claim of Murder and Crime rate down 95%?  Their crime rate has been falling since 2015, long before they adopted Bitcoin.

  • 2015 - 103 per 100k homicides
  • 2016 - 81 per 100k
  • 2017 - 60 per 100k
  • 2018 - 50 per 100k
  • 2019 - 36 per 100k
  • 2020 - 20 per 100k
  • 2021 - 17.5 per 100k
  • 2022 - 10.8 per 100k (projected)

https://elsalvadorinfo.net/homicide-rate-in-el-salvador/

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Anytime someone proclaims open mindedness and not trusting main stream media, there's a ridiculously high chance they'll ironically subscribe to tenuous and narrow views sourced from even less credible sources.

So basically the opposite of open mindedness.

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Pretty sure he will say you need to do your research. 

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I'm not useless when it comes to using tech.  However, over a month ago I did a test buy of $50 of BTC. Still hasn't arrived in my wallet. The instructions I get to try and locate it require knowledge that is like foreign a language.

Fault..maybe mine. One day I might re-visit if I run into someone who can help me me find it. 

But at present for me this crypto stuff is a fail. 

 

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Wait until you forget or lose your passphrase/key to access your wallet.  Not sure if there's an 0800 Bitcoin number you can call to recover your lost funds.  

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Where did you buy it from? And what wallet are you using? 

Bitcoin transactions are basically instant currently. 

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Jaxx Liberty wallet and Easycrypto. Both were pretty decent with the help response tomes etc but its above my head what the heck they are talking about.

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Yeah, it's not a simple as it will get I would hope.  If you bought from Easycrypto on their website you will have needed to enter your wallet address.  Maybe you didn't have that recorded correctly?

Note that the wallet address is a different thing from your 12 word recovery phrase, which you should not disclose to anyone, and you won't need for buying or selling.

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Funnily I was a first at a professional group library ordering the first crypto book many years ago. BTC was $400.  I thought this is a good idea!  Then I got to chapter two and the math. Buying it as a non techy looked hopelessly daunting.

Too bad, I would have sold at a $1000

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These are just facts on El Salvador,  I am not attributing it all to Bitcoin guys, come on use your brains.

But it has definitely helped. 

Reported by the IMF and the dictator himself:

https://bitcoinmagazine.com/print/stop-drinking-the-elites-kool-aid

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CBDC is being / will be rolled out around the world.  This will be linked to Digital identities, Vaccine passports, Individual carbon credits, and the phasing out of physical cash. The State will have total control of your money and life. Not a good situation. 

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Is it hard finding a Milliner that works with tinfoil?

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CBDC is money Nirvana for the government, as you say, it can be allocated completely on targeted expenditures, ideal for benefit payments of all sorts to ensure that the funds are expended in the manner which the government intended, like of quality food and not alcohol or tobacco.  Cash folding notes will be long gone at this point.  Every transaction is traceable and all taxes automatically deducted, no need to file any returns any more.

the downside being that ALL your funds will be in this CBDC and absolutely anyone can be blocked from using it on anything at any time, a truly potentially draconian (or is it dystopian) society, be very careful who you vote for (and don't forget that if you don't vote your CBDCs will be held until further notice. or possibly until you have voted for the right party).

 

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You won't be happy Hans when they allocate you some digital currency, but it will expire on you within the month unless you spend it on a new hair do  and it can't be used at the Red Lion or on round-up.

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I see nothing wrong with that?  We allocate money all the time to the unemployed, some of whom spend frivolously on luxury items and then put their hand out for a WINZ food grant which they are quota'd on an annual basis. 

Maybe digital currency can be issued so that it can only be spent on food, and not pokies.   

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Why stop at beneficiaries? Wrong choices made at the supermarket put undue stress on our healthcare system. Perhaps you need some restrictions on how much sugar and alcohol ends up in your trolley each week, or maybe some kind of fast food quota.

After all, it's for your own good.

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Great idea - also add Super payments will only only work at NZ retailers, expire in 1 Year, and do not work in RSA's and bowls clubs?

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Awesome.  We could also cap rent payments at a certain amount, maybe even index rent payments to a maxima that commentator Kate was talking about on here for a while.  

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You see nothing wrong with being told how to spend your money? Ultimate form of control. 

No you can't go out for a movie tonight Nzdan, we have just seen the results of KFC who had a poor month so tonight your digits will only work there. And if you don't go, they expire.

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Okay, so explain to me the practicality of such an arrangement. 

  • Does the Government send out a memo to 5 million people stating that a portion of their digital currency can only be used at certain locations? 
  • Is there an APP which will show which portion of your digital currency can be spent where?
  • How often are these parameters updated?
  • What if I'm just about to pay for said Movie tickets, or Groceries, and the parameters change on my account?

Come down from there before you hit your head on the firmament, space cadet.

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The sort of manipulations Rastus talks about are certainly possible - CBDC are cryptos, so they can be programable to behave however they like.

My main objection to CBDCs though is that they will just debase the crap out of them as govts continue to go broke and need the central banksters to pick up the tab.  In other words, its' just more fiat crap.  Govts/banks can't be trusted with Monetary Policy.

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I'm well aware they are programmable.  The Government could, say, issue a whole load of currency with a string that begins with a certain sequence and prevent that currency from being transferred to certain establishments or can only be spent at certain locations.    

But what happens once that currency is spent at said location?  Does the company pay the employee using that crypto and then suddenly that employee cannot spend it anywhere but their own place of work?  

I don't think Rastus has really thought it through.  

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Well if that's how CBDC's are going to work I think I will stick to good old reliable Fiat. I haven't been to the Red Lion for years rastus, but I see it has had a total revamp.

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ha me neither.  But I can still smell the fragrance and haze that would woft through the back bar! Good old wangas.

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Google maps told me I went to four bars last month, which was more than any other month previously.  How many DC's would I lose for such appalling behaviour? CBDC's have the potential to change our lives to a world many of us will not recognise in a very short period of time.  I personally feel a little uncomfortable by the prospect.

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Bitcoin is our only hope for freedom. There is nothing else that allows peer to peer instant transfers of a BEARER instrument. It is NOT credit or someone else's liability. 

I have to do it...HFSP 😝

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If people have a problem with being one of the 99%, the realities of Bitcoin are far worse.

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HFSP???   while buttcoin is down a further 22% in 3 days, from what was already down 70% from the highs?   righto..

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Bitcoin was invented with the sole purpose of undermining central banks' monetary sovereignty. 

Money without energy is just credit. We will win. 

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Sounds like the reserve bank want to undermine the monetary sovereignty of the individual.

As if they haven't done enough damage to people already.

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Monetary sovereignty

Why would anyone think this is a thing. As soon as you have to exchange value with someone else, any sovereignty is gone.

Everyone is free to make their own currency and exercise 100% control over it.

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The enthusiasm for bitcoin and similar would be exceptionally modest were it not for concern about fiat currencies. Electronic printing of fiat currencies, which has been occurring globally, and is known as quantitative easing, lies at the heart of that problem.  Right now that electronic money printing has largely stopped across the globe (but no doubt still occurring in some countries) but as long as the temptation exists.....
KeithW

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The enthusiasm for bitcoin and similar would be exceptionally modest were it not for concern about fiat currencies. Electronic printing of fiat currencies, which has been occurring globally, and is known as quantitative easing, lies at the heart of that problem.  Right now that electronic money printing has largely stopped across the globe (but no doubt still occurring in some countries) but as long as the temptation exists.....

Agree. BTC in particular is deflationary in the way that fiat currency is not. If central banks and govts are intent on destroying fiat currency as a store of value, you can see a compelling reason for its existence and the motivation to hold it.  

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That is certainty my enthusiasm.

The RBNZ called for submissions on that thought piece they did on a CDBC about 6 months ago?  I didn't put in much effort but I could not see mention of how the supply would be controlled (hardly surprising I guess).  Anyway, the main point I made in my submission is that if they are just going to debase it like fiat then go for it but I'm not in.

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