Australia and New Zealand have both just ruled out the option of pursuing a central bank digital currency (CBDCs) – at least for now.
In a speech on Tuesday, Tony Richards, head of the payments policy department of the Reserve Bank of Australia (RBA), said while his institution feels there is little demand for a CBDC, should the public move to adopt a new e-money in numbers, there could be “significant implications for the bank’s financial stability mandate.”
Richards – who explained that he has owned bitcoin and used it in retail transactions since 2014 – further argued that the cryptocurrency also still has “structural flaws” that put limitations on its potential. He continued to say that “the scalability and governance problems of the bitcoin system” put it far behind traditional payment methods such as Visa.
“The transaction fees and the queue of unconfirmed transactions [during the December 2017 price peak] raise the broader question of how well bitcoin (and other cryptocurrencies) perform when we look at the key attributes of money – namely that it should represent a store of value, a medium of exchange and a unit of account. Here, I think there is fairly substantial agreement.”
Subsequently, he reiterated the RBA’s stance that issuing a central bank digital currency – or an “eAUD” as the bank’s governor Philip Lowe called it in a previous speech – is not necessary within the existing financial system.
“So for the time being at least, consideration of a possible new electronic form of money provided by the Reserve Bank to households is not something that we are actively pursuing. Based on our interactions with our counterparts in other countries, it is also not front of mind for most other advanced economy central banks.”
Taking a similar tone, Geoff Bascand, governor of the Reserve Bank of New Zealand, also argued in a speech today that a central bank-issued cryptocurrency would not be financially stable given its existing scalability constraints and lengthy transaction confirmation process.
“At this stage it is yet to be seen that a central bank digital currency will bring conclusive benefits. … Currently, it is too early to determine whether a digital currency should be issued,” Bascand argued.
RBA image via Shutterstock