Australia central bank sees weak case for a retail CBDC
05:12, 9 December 2021
The Reserve Bank of Australia (RBA) remains open for retail central bank digital currency (CBDC), though it does not see compelling reason for near-term adoption on the back of Australia’s advanced payment systems.
RBA Governor Philip Lowe said in an address to the Australian Payments Network Summit said that the advancing technologies could allow the exchange of digital forms of money backed by the central bank.
“This would be a form of retail central bank digital currency – or an eAUD,” he said. “The RBA is open to this possibility. To date, though, we have not seen a strong public policy case to move in this direction, especially given Australia’s efficient, fast and convenient electronic payments system.”
Lowe’s comments came as the Australian government embarks on a massive overhaul of its payment systems, including initiatives to regulate cryptocurrency and studying the possibility for a retail CBDC.
Stablecoins
Lowe welcomes the government’s move for a broad revamp in Australia’s payment systems and will work with the Treasury Department on looking at the viability of digital currency.
“Another possibility is that payment tokens are issued and backed by an entity other than the central bank, though still denominated in Australian dollars. These could be a form of stablecoin,” said Lowe, adding that such tokens should be backed by high quality assets and meeting high standards for safety and security.
“And if there were to be multiple stablecoins, there would be advantages in them being interoperable. The RBA is working with domestic regulators and our counterparts around the world on the policy issues here,” he said.
Sceptical on cryptocurrency
Lowe reiterated his views on cryptocurrencies, citing them as highly volatile assets and plenty of uncertainties surrounding their long-term usefulness.
Given the volatility of cryptocurrencies, the governor is sceptical they would be able to serve as a payment method.
“That is not to say there is no role for crypto-assets. They can help support innovation, especially where they are linked to smart contracts and used in decentralised finance applications. There is value in experimentation to find out what works and what doesn’t,” said Lowe.
Keeping an open mind
Caroline Bowler, chief executive of crypto exchange BTC Markets, said that central bank and government authorities might have some level of trepidation on crypto assets as they need to consider macroeconomic stability, but the important thing is to remain open for possibilities that the technology can offer.
“It shouldn’t form a reluctance to explore and understand the possibilities within cryptocurrency,” she told Capital.com.
Bowler, whose BTC Markets saw more than AUD10bn transactions this year – about the same as total value between 2013 and 2020, welcomes the government’s move to regulate the cryptocurrency as “we identified lack of regulation as being a key risk for our clients, for our business and for the industry as a whole.”
Further studies on wholesale CBDC
“Our payments system is changing quickly. Both the regulators and the government understand this and are seeking to put in place arrangements that encourage innovation and competition and make sure we have a secure and efficient system,” said Lowe.
Touching on wholesale CBDC, the governor said there is merit to further deepen studies on the matter. On Wednesday, the RBA issued a report following a year-long study called “Project Atom” which seeks to test the viability of syndicated loans using distributed ledger technology.
“Overall, the project has confirmed that this is an area worth further research. The RBA is also in the midst of another significant wholesale CBDC project – Project Dunbar, which is being conducted with the BIS Innovation Hub and three other central banks – to explore the possible use of CBDC in cross-border payments,” said Lowe.