The Reserve Bank of New Zealand (RBNZ) deputy governor and operations head, Geoff Bascand, said digital currencies may one day replace cash. In his recent speech before the Royal Numismatic Society in Wellington, he described digital currencies like Bitcoin as a challenge to the form and use of money.
Bascand enumerated some of the advantages and drawbacks associated with digital currencies. He said digital currencies like Bitcoin were created as an alternative mode of payment and store of value. He believes Bitcoin is a "very low cost payment method with strong security features." Bascand said this feature makes it better than traditional payment modes.
However, he also noted digital currencies still have several drawbacks since few businesses accept them as a form of payment. According to reports, price volatility remains a concern. Bascand explained that if certain conditions are met, digital currencies can replace money.
He said Bitcoin and other digital currencies should meet the key attributes of trust and anonymity to gain acceptance. Trust, according to Bascand, means the money will create the need to settle an obligation. Unlike traditional money, Bitcoin cannot be paid anonymously since there is always a corresponding identification attached to the transaction.
In light of banks fearing digital currencies, Bascand advised them not to be overwhelmed by innovation. He suggested keeping track of developments in digital currencies and the changing needs of the public.
In late 2013, both the Reserve Bank of Australia and the Reserve Bank of New Zealand had issued warnings about digital currencies. Regulators have taken steps to control Bitcoin development in both countries.
The National Australia Bank (NAB) has turned its back on Bitcoin vendors and digital currencies in general because they were "too risky." The Australian bank has sent letters to its business customers who were known to trade in Bitcoin and other cryptocurrencies. Customers involved in Bitcoin trading had their accounts closed on May 2.
A spokesman for the Australian bank has confirmed the move and said NAB reviews its risk profile regularly and the type of businesses it provides services. These reviews ensure that the bank's activities serve the best interests of customers and shareholders.