prudential regulation face a variety of requirements and incentives to ensure that they manage all their material risks adequately. the reserve bank would expect these entities to have prudent risk management in place for any of their activities involving cryptocurrencies. it is not yet clear what prudential scrutiny of a crypto - currency might entail. a crypto - currency itself is not a legal entity, and distributed crypto - currencies like bitcoin do not have a central agent or issuer to manage the currency. therefore, crypto - currency regulation could be complex. currently, the most likely way to regulate crypto - currencies is via crypto - currency exchange platforms ( between crypto - currencies and other currencies ). regardless, the use of crypto - currencies by non - regulated institutions is small compared to the size of our financial system so is unlikely to pose a material risk. and the volatility of crypto - currencies ( that do not trade at par value with fiat currency ) make it highly improbable that any regulated entity would start predominantly using crypto - currency. in addition, anti - money laundering and countering financing of terrorism ( aml / cft ) legislation might create significant hurdles for financial entities to associate with cryptocurrencies. aml / cft legislation requires financial institutions to know their customers, which is at odds with distributed pseudo - anonymous crypto - currencies. crypto - currency issuers and crypto - currency exchange platforms would need to remove anonymity from cryptocurrencies to implement aml / cft. the reserve bank does not currently plan to issue any new regulation regarding privately issued crypto - currencies as they do not currently pose a systemic risk to financial stability. 15 moreover, existing prudential regulation and aml / cft legislation already set out that supervised entities should manage their business prudently and know their customers. conclusion the gold rush began in new zealand in 1861. the search for riches continues in today ’ s technological world. for the reserve bank, that is searching for ways to harness new technologies and do things better. we have explored whether issuing a digital currency is one way we can use new technologies to better meet the needs of the public. at this stage it is yet to be seen that a central bank digital currency will bring conclusive benefits. from a system - wide perspective the pros

far more complicated than in this simple illustration. three of the shocks shown in figure 2 delivered ongoing pressure to the economy. even the relatively short - lived large inflow of migrants in 2002 / 03 had ongoing impacts. the housing stock cannot be increased as quickly as the changes in migrant flows. consequently, house prices rose and, even after the boost to population subsided, continued to rise beyond all forecasters ’ expectations. higher house prices in turn stimulated a large construction boom which put further pressure on resources. private sector credit started to expand well in excess of the nominal growth in the economy ( figure 5 ). in line with conventional wisdom, we put relatively less weight on credit data than on interest rates. 6 had we had a higher weighting on credit growth data, our view of the persistence of pressure on resources would likely have been stronger much earlier in the boom. the academic consensus on monetary policy used to be that there was no independent information for monetary formulation in money and credit numbers over and above that available in interest rates. see for example, gali, j ( 2008 ) monetary policy, inflation, and the business cycle : an introduction to the new keynesian framework, princeton university press, princeton. while this view was never completely accepted at the reserve bank of new zealand ( bollard, a ( 2005 ) “ housing debt, inflation and the exchange rate ” address to the employers and manufacturers association ( northern ) agm ) ) money and credit aggregates were never very prominent in the formulation of monetary policy. one of the processes we changed following the global financial crisis was to formally present information on monetary and credit aggregates to the monetary policy committee to assist with the production of the bank ’ s forecasting in its monetary policy statement. bis central bankers ’ speeches figure 5 excess of domestic credit growth over nominal gdp growth source : statistics new zealand, rbnz calculations monetary policy in new zealand is also complicated by exchange rate issues. in a small open economy the inflation target is a complement to a floating exchange rate regime. during the boom period expectations of tight monetary policy to offset the excess demand pressure probably contributed to the persistently high exchange rate throughout the period, causing considerable discomfort and worries about the sustainability of parts of new zealand ’ s tradable sector. after the global finance crisis there are new challenges for monetary policy to deal with. the current recovery in the business cycle, both in new zealand and in other advanced economies, is proving weaker than historical precedents. our forecasting frameworks