RBA: next-generation cryptocurrency may be widely used, there is currently no need to issue CBDC

According to recent foreign media news, the Reserve Bank of Australia (RBA) said that it has been closely monitoring the development of cryptocurrencies such as bitcoin for many years and believes that it is unclear whether there will be strong domestic demand.


Image source: Pixabay

According to the RBA, such developments may affect its authorization as an issuer of paper currency, the operator of the country's real-time general clearing system, and also bear the responsibility of "the stability of the financial system and the stability and efficiency of the payment system. responsibility".

The RBA stated in a document submitted to the Financial Technology and Regulatory Technology Task Force:

"Many Australian fintech entities are providing services related to cryptocurrencies, both as a means of payment and as speculative assets."

It also describes the opportunities these two media bring to Australia.

"The central bank's current assessment is that the cryptocurrencies seen so far have not provided the usual currency functions, which explains why they are not widely used as a means of payment in Australia."

However, the central bank said that newer cryptocurrencies are emerging or have been proposed to address some of the shortcomings of early iterations. It said that the next generation of cryptocurrencies may become more widely used in the future.

The central bank continued:

"The first generation of cryptocurrencies, such as Bitcoin, were the largest and most well-known cryptocurrencies, with large price fluctuations, which meant they were very bad as a store of value."

Speaking of Facebook's Libra project, the Reserve Bank of Australia said that Libra may be widely used due to the participation of various companies, which may be able to take advantage of their large existing user base and technical capabilities.

"Based on publicly known Libra, it will be distinguished from existing cryptocurrencies because it will be fully supported by asset reserves, which include a basket of bank deposits and short-term government securities denominated in various national currencies." The OK wrote.

The Reserve Bank of Australia said that Libra's disclosure prompted regulators around the world to carefully consider the potential risks and benefits of cryptocurrencies, especially stablecoins.

The Reserve Bank of Australia agreed with the previous decision of the Group of Seven (G7), stating that the private sector should not be allowed to launch a global stablecoin plan until all risks and regulatory requirements have been addressed:

"Banks are working closely with relevant agencies at home and abroad to understand recent proposals to ensure they will be adequately regulated."

The Reserve Bank of Australia said that in Australia, even if the global stablecoin does meet all regulatory requirements, especially for domestic payments, it is still unclear whether there will be a strong demand for the global stablecoin.

The central bank told the committee: "Australia has been well served by a series of low-cost, efficient real-time payment methods, such as NPP, which uses funds held in the accounts of carefully regulated financial institutions. In addition, although in the past Australians may not be well served by banks that offer cross-border payment services, but in recent years, many new non-bank digital participants have entered the market and they offer cheaper and faster money transfer services. "

Regarding the central bank's idea of ​​issuing a new type of electronic currency on a blockchain platform in the form of a central bank digital currency (CBDC), the RBA said that it is currently unnecessary and said:

"Like most other central banks, the bank's assessment is that there is no reason to issue a CBDC for household use. One possibility is that households have little need for this asset because they can already provide payment services To obtain digital currency in the form of commercial bank deposits, which are interest bearing and are protected by a financial claims scheme (up to $ 250,000 per account). "

But it said demand for CBDC could increase, especially during "uncertain periods."

Through its in-house innovation lab, the Reserve Bank of Australia has been studying whether the digital Australian dollar plays a role within the responsibilities of banks in issuing currency and overseeing payment systems.

In the lab, the Reserve Bank of Australia developed a proof-of-concept for a wholesale settlement system that runs on a dedicated, licensed Ethereum network.

The bank believes that this proof of concept simulates a situation where the central bank issues tokens to commercial banks in exchange for foreign exchange settlement account balances, the exchange of these tokens between commercial banks, and eventually redemptions to the central bank. "It is the intention to expand this research over the next year, possibly through collaboration with one or more external partners."