Australian central bank dismisses need for digital currency

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The Australian central bank believes that there is currently no strong public policy case for a central bank digital currency. However, the regulator will continue conducting research on the feasibility of a CBDC in its mandate to promote efficiency of payments.

This was the declaration made by Tony Richards, the head of payments policy at the Reserve Bank of Australia. Addressing the UWA Blockchain, Cryptocurrency and Fintech Conference, the executive said Australians still use cash for most of their payments. Moreover, the country’s digital payments systems are adequate for the citizens’ needs.

He told the conference, “Even though the use of cash for transactions is declining, cash is still widely available and accepted as a means of payment. In addition, Australian households and businesses are well served by a modern, efficient and resilient payments system that has undergone significant innovation in recent years.”

While dismissing the need for a CBDC, he noted that the regulator will continue “to consider the case for a CBDC, including how it might be designed, the potential benefits and policy implications, and the conditions in which significant demand for a CBDC might emerge.”

Richards was reiterating the views previously expressed by the Reserve Bank in September when it reportedly said it was skeptical of the benefits of a CBDC. As CoinGeek reported, the bank stated in a paper on payments that there was no strong policy argument for embracing a CBDC. It also claimed that Australians are far more reluctant to switch from cash to digital payments than people in other countries, further reducing the need for a digital Australian dollar.

Richards, in his speech, delved into some of the factors the Reserve Bank is weighing regarding a CBDC, including its usability in-person, online and offline, whether it would be account-based, token-based or a combination of the two and the roles that a central bank and the private sector would play. The bank is also considering the degree of privacy and anonymity a CBDC would give the users and whether it would bear interest.

The Reserve Bank is also concerned about the use of decentralized ledger technology to underpin the CBDC.

“The use of DLT could potentially provide benefits in terms of enhanced resilience and availability, although the overall benefits of decentralisation might not be all that large,” Richards stated.

He went on to state that most of the payment issues faced by consumers are with service providers and localized networks, “not an interruption to the centralised infrastructure, which is generally built to be highly resilient.”

The Reserve Bank joins a number of other central banks that have recently revealed their stance on the issuance of a CBDC. Recently, seven of the largest central banks partnered with the Bank for International Settlements to publish guidelines on CBDC issuance.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.