The Reserve Bank of Australia and a global investment bank say the speed of payments innovation will fend off any threat from cryptocurrencies, and creating digitised versions of central bank money will make bank runs much more likely during a crisis.
After last year’s speculative bitcoin bubble, the potential for the Australian central bank to issue digital dollars to allow money to move through distributed ledgers is fading.
RBA assistant governor Michelle Bullock told a global audience at Sibos that while it’s still open to considering wholesale applications for a digital Australian dollar, it hasn’t yet been convinced of the need to create one, and the RBA does not want one for domestic use.
“The system works well and you don’t actually need access to direct settlement to do lots and lots of business,” she told the event in Sydney.
The RBA, like other central banks around the world, has been pressured by fintechs to open up its payment infrastructure by making the real-time gross settlement system more accessible.
“I’m interested to consider what frictions these technologies are designed to address [but] in many cases I just don’t see what the point is,” Ms Bullock said.
“I think there’s an element of – it’s a new technology, we have to find a use for it,” she said, but the burden of proof is on those wanting change, and she said she hasn’t yet been convinced.
“We do have more of an open mind on the issue of wholesale and whether or not central bank digital currencies should play a role in assisting with perhaps supply chains, cross border … But it remains for industry to demonstrate to us really why what we have got available in terms of payments systems, including those still coming on board, can’t actually deliver that already.
“I am not convinced that it has a use.”
The global business head for payments and receivables at Citi, Manish Kohli, agreed, saying global central banks won’t have to create digital currencies due to rapid innovation across global payments systems.
These are occurring in three areas: banks’ own investment in payment infrastructure; Swift’s transformation; and national infrastructure being drastically improved, including real-time capability (such as Australia’s “new payments platform”).
“You put these three together, this combination is going to progressively make the need for digital central bank issued digital currency unnecessary,” Mr Kohli told The Australian Financial Review on the sidelines of Sibos.
The event is being attended by global banks and disrupters like Ripple, which has developed a blockchain-based alternative to Swift allowing funds to move across borders via its own cryptocurrency.
“I think the trifecta is much more credible than the alternatives, which I just don’t see are credible enough,” Mr Kohli said. “Banks of repute won’t want to touch cryptocurrencies to move money because of the market risk they carry.”