I would assume this has little to do with traditional cryptocurrencies, but uses Blockchain as it’s leger.
If I were in charge of this project, I would have a centralized validation system, maybe a series of servers across the country for redundancy. It doesn’t need PoW or PoS as all validation is run by the RBNZ.
As for what this solves, I can think of a few things:
Opening up fiat interaction with other cryptocurrencies
Much lower fees for digital transactions
Near-instant transactions
Physical storage of digital funds. Paper wallets and other secure methods
From the govt point of view, perfectly tracible cash transactions