Crypto’s Huge Gains Could Be Erased by Changing Trends, Says RBA Official
(Bloomberg) -- The significant gains in the cryptocurrency market could be erased by changing trends as well as regulatory and monetary developments, according to an official at the Reserve Bank of Australia.
Factors that could combine to pressure digital assets include lower influence of fads, greater concern about the industry’s energy usage and association with financial crimes, said Tony Richards, the RBA’s head of payments policy.
He also said in a speech Thursday that new stablecoins -- digital assets that attempt to peg their value to something like the U.S. dollar -- as well as central bank digital currencies -- could fill needs that force cryptos into “niche use cases.”
“There are plausible scenarios where a range of factors could come together to significantly challenge the current fervor for cryptocurrencies,” Richards said. “The current speculative demand could begin to reverse, and much of the price increases of recent years could be unwound.”
Cryptocurrencies have enjoyed spectacular gains as more investors become interested in the idea of digital assets, the market matures and areas like decentralized finance (DeFi) and non-fungible tokens (NFTs) take shape.
Still, the asset class is new and volatile; many people in traditional finance and regulators have expressed concerns about its potential risks. These range from the U.S. Securities and Exchange Commission’s Gary Gensler to Axel Weber, the chairman of UBS Group AG and former president of the Bundesbank.
Richards also said the RBA still isn’t convinced a central bank digital currency is needed in Australia, though it’s going to do more research on the subject.
“The bank acknowledges the argument being made internationally that with all the innovation that is occurring in the payments area, provision of a new digital form of central bank money for general purpose use could be important for safeguarding confidence in national monies and the role of fiat currencies.”
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