The Reserve Bank has paused the development of its digital cash proposal.
It had been planning to have a government-backed digital currency in place by 2030.
University of Otago economist Murat Ungor has previously described it as a way that New Zealand could shore up monetary sovereignty.
"Right now, when you check your bank balance, you are looking at a promise from your bank to pay you," Ungor told RNZ.
"With a central bank digital currency, that money would be a direct claim on the Reserve Bank itself, the safest form of money possible."
The Reserve Bank said it was focused on a broader work programme exploring how to modernise the payment system and implement a real-time retail payment solution.
"This is an important area of focus for the Reserve Bank due to the essential nature of payment systems as a core economic infrastructure that supports the whole economy.
"While the system remains reliable for many users, there is an opportunity to maximise its contribution to a digital economy and prepare it for an increasingly uncertain future.
"Modern payments infrastructure would be able to support emerging new forms of payment including digital central bank money along with the private money in your banking account."
Ungor said the pause was not a concern as long as it did not turn into a drift.
"The Reserve Bank treats the two strands of its Future of Money and Payments work, digital cash and payments modernisation, as closely connected. Getting the underlying payments infrastructure right first makes sense.
"There is little value in introducing a new form of digital money without considering how it would fit into a modern payments system.
"The Reserve Bank has identified potential benefits from modernisation, including lower transaction costs, less fraud and scam activity, and opportunities for new products and services. Addressing the practical limitations of the current system and modernising the infrastructure is a sensible priority.
"At the same time, the reasons for exploring digital cash have not disappeared. Cash use and acceptance are declining, while private forms of digital money, including stablecoins, are developing.
"This raises important longer-term questions about access to central bank money in digital form and New Zealand's monetary sovereignty. There is a legitimate debate about how significant these risks are, and whether digital cash is the right response.
"But those questions deserve a considered answer, even if the eventual conclusion is that New Zealand does not need to introduce it."
He said the Reserve Bank should algin its work on payments modernisation with its assessment of digital cash rather than allowing digital cash to fall off the agenda.
"I would like to see it maintain the policy work, explain clearly what criteria would trigger a resumption or a decision not to proceed, and continue engaging with the public.
"Public concerns also need to be taken seriously. In its consultation, the Reserve Bank found substantial concern about the possibility that digital cash could replace physical cash. It has stated that digital cash would not replace physical cash, and it is important that this distinction is communicated clearly."
