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Aussie central bank backs private sector crypto tokens

By Aaron Woolner

07:55, 18 July 2022

The Australian authorities are looking for a private sector payment solution - Photo: Shutterstock

The Australian authorities have doubled down on their stated preference for private sector-backed digital currencies, over a retail central bank digital currency (CBDC). 

In late 2021 the Reserve Bank of Australia (RBA) said that it saw a ‘weak’ case for retail CBDCs and while movement on a wholesale equivalent may be possible it appears the central bank favors a private sector alternative for electronic payments in the country. 

Phillip Lowe, governor of the RBA spoke on a livestreamed panel discussion of the G20 Finance Ministers being held in Indonesia about the need to set out a crypto regulatory framework.

Calls for crypto regulation 

According to a report by Reuters, Lowe said that despite a number of recent crisis hitting the sector, such as the collapse of the Terra Luna blockchain and BTC’s recent price drop, cryptocurrencies' existence merited regulation. 

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"If these tokens are going to be used widely by the community they are going to need to be backed by the state, or regulated just as we regulate bank deposits," Reuters reported Lowe as saying.

Australia’s stance is at odds with a number of countries around the world. 

According to US think tank the Atlantic projects there are currently 109 countries globally which are at various stages of investigating retail CBDCs.

XRP/USD

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Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

Bhutan backs CBDCs

These include financial minnows such as the Himilayan state of Bhutan, which is partnering with Ripple - the firm behind XRP. 

Another is one of Asia’s poorest countries, landlocked Laos which recently reversed a crypto ban and is investigating retail CBDC in tandem with Japanese tech Soramitsu.

XRP to the US dollar 

Soramitsu is also helping pilot a retail CBDC among a group of Pacific island states and it appears that the greatest benefit will come to less developed economies. 

When Australia’s Federal Treasurer Josh Frydenberg announced a review of payments as a result of crypto and buy now pay later in December 2021 he made it clear that the existing payment rails meant a retail CBDC was not needed.

Australia 'not a CBDC frontrunner'

Speaking to Capital.com at the time Marcel Thieliant, senior economist for Australia, New Zealand and Japan at Capital Economics was skeptical that a retail CBDC would be introduced in Australia. 

“It is clear that the RBA isn’t among the frontrunners when it comes to introducing a retail CBDC. The RBA is also arguing that its existing payments system is highly developed,” he said. 

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