Bitcoin Unlikely To Gain Foothold In Australia, Says Central Bank Official

News | June 27, 2018 By:

Tony Richards, head of payments policy at the Reserve Bank of Australia (RBA), said that bitcoin is unlikely to be widely adopted in Australia.

In a speech to the Australian Business Economists in Sydney on Tuesday, Richards said that cryptocurrencies outside the control of traditional institutions could have practical applications – but probably not in Australia. He said local usage is currently so limited that the RBA does not see it having any impact on monetary policy or the stability of the financial system.

“When a country doesn’t have a credible currency, then people might look for other ones” Richards said. “Whether those are cryptocurrencies or something like the US dollar is another issue, but we in Australia have a perfectly credible currency called the Australian dollar; we’ve had low and stable inflation for at least 25 years; and the likelihood that we’d have significant adoption of an alternative currency seems to be pretty low. “The use of crycoptcurrencies in Australia is just so trivial that it doesn’t have an affect and I think we can assume that will be the case for a long time.””

Richards added that even in countries that were prone to financial disruption, cryptocurrencies were not necessarily being used in favor of regulated currencies like the US dollar.

“What we have seen, is that countries with less developed financial infrastructure are more prone to disruption,” Richards said. “But with cryptocurrencies, unless people really want to transact and hold these cryptocurrencies, then they still have to get in and out of their domestic currency. There are a few countries that don’t have trust in their domestic currencies, so the US dollar is used.”

According to Richards, bitcoin’s volatility causes a high degree of market risk in holding it and would prevent it from mainstream adoption. He compared the volatility of bitcoin to that of the Australian dollar and stated that “bitcoin and other cryptocurrencies are yet to establish themselves as reliable stores of value.”

Richards also said that bitcoin’s scalability and governance problems undermine its legitimacy as currency. He said bitcoin’s lack of a central governance structure has been a weakness in dealing with the capacity problem that results from the fact that the original protocol limits the block size to no more than 1 megabyte.

“And there have also been many hacks of cryptocurrency exchanges and wallets over the past few years,” Richards said. “That shows there is also a lot more risk in bitcoin intermediaries than there is in the supervised banks and financial institutions in which households can hold their Australian dollars.”

Richards dismissed the need for an issuance of existing currency on a distributed ledger technology. He doesn’t think the Reserve Bank should create a blockchain version of the Australian dollar. Even though he agreed, broadly, that “another form of central bank settlement instrument could reduce risk and increase efficiency in business transactions.”