In a submission (pdf) to the committee on Financial Technology and Regulatory Technology just before Christmas, RBA officials were skeptical that cryptocurrencies, in their current and future forms, would ever replace government-issued money.
Although newer initiatives like Libra and CBDCs could promote financial inclusion, the bank’s current assessment is that innovation within the broader fintech space will make these solutions redundant.
“In Australia, it’s unclear that there’ll be strong demand for global stablecoins albeit they are doing meet all regulatory requirements, particularly for domestic payments,” reads the submission. “Australia is already well served by a variety of low-cost and efficient real-time payment methods, like the NPP [New Payments Platform] that utilize funds held in accounts at prudentially supervised financial institutions.”
In 2018, the RBA established an in-house research team to raised evaluate new technologies for the country’s payments system. that has financial institution digital currencies, where the team has trialled a “wholesale settlement system” on a personal ethereum network, to raised understand whether tokens could create efficiencies in issuing currency to commercial banks.
CBDCs have seen support from some central bankers, including Christine Lagarde and Mark Carney. The People’s Bank of China (PBOC) is currently putting its “digital yuan” through real-world tests before public issuance sometime within the future.
But the RBA believes a “digital Australian dollar” would be an unnecessary disruption to the prevailing economic system , particularly for retail use. The bank cites research by firm Ernst & Young that also found a CBDC would be the “least effective” solution for promoting growth within the Australian fintech sector.
Following years of watching the asset-class, the RBA remains unconvinced about the longer term of cryptocurrencies. Most are rarely used or accepted as payment, despite some being around for nearly a decade; their price volatility makes them fashionable speculators, instead of with ordinary citizens. This “explains why [cryptocurrencies] haven’t become widely utilized in Australia as a way of payment,” reads the RBA submission.
Although the Australia government has trialled various solutions, including a token by its bullion mint that permits investors to trade and settle gold in real-time, it’s adopted a reasonably skeptical view to cryptocurrencies overall.
The chief digital officer of the Digital Transformation Agency (DTA) said last year that although blockchain was “interesting,” it had been overhyped by the industry. The RBA’s governor, Philip Lowe, said last summer he didn’t see what role the newly launched Libra project would fill during a country that already has an efficient electronic payment system.
Conventional systems include the NPP, which launched in 2018 to supply Australian citizens with a real-time solution that permits users to send transactions employing a telephone number or email address. Although it had been backed by the financial institution , uptake has been low with only a couple of economic banks currently support the platform. An RBA report in June 2019 described the rollout as “disappointing.”