ADVERTISEMENT

Australia’s Central Bank Still Sees No Case for Digital Currency

Australia’s Central Bank Still Sees No Case for Digital Currency

Australia’s central bank said it still doesn’t see a strong case to introduce a digital currency, given the nation’s current payments system was recently upgraded and meets the needs of most firms and consumers.

Reserve Bank payments policy chief Tony Richards used a speech Wednesday to summarize a recent research article that found no strong public policy case for a central bank digital currency -- CBDC -- for general use. The RBA will, however, continue to monitor developments in the field, he said.

“Australian households and businesses are well served by a modern, efficient and resilient payments system,” Richards said. “It is not obvious that a CBDC would be a solution to any particular problems or that there would currently be significant demand for one.”

Australia’s Central Bank Still Sees No Case for Digital Currency

Australia’s central bank, similar to its global counterparts, has been investigating the benefits and costs of new forms of electronic money as payments worldwide increasingly shift online.

A 2019 survey conducted by the Bank of International Settlements found that of 66 central banks polled, 80% were doing some work on digital currencies. Yet around 70% said it was unlikely they would issue one in the foreseeable future.

Those central banks that were embarking on pilot projects or had developments underway, tended to represent emerging market institutions. Their overriding goal was to improve financial inclusion by filling in gaps in the system.

One potential risk for those moving into digital currencies is that authorities risk cutting out commercial banks, and in doing so undermining the vital funding role played by deposits. That, in turn, would threaten to significantly alter the structure of the financial system.

The RBA highlighted recent innovations in the payments system that allowed for real-time around the clock transfers that satisfy the needs of most users.

Yet, views are changing. The Bank of Japan on Friday announced that it aims to start early phase digital currency experiments next year in order to be prepared in the event demand for one rapidly emerges. Sweden’s Riksbank launched a digital currency pilot project earlier this year to explore the feasibility in what is the world’s most cashless economy.

“If it turns out there are significant benefits, we will be able to be fast followers, avoiding any early mis-steps and taking full advantage of the inevitable technology learnings,” Richards said.

©2020 Bloomberg L.P.