by Cindy Huynh
According to the Sydney Morning Herald, Tony Richards, the Reserve Bank of Australia’s (RBA) head of payments policy, has deemed Bitcoin a fascinating development and has a highly admirable design. He, however, noted Bitcoin is not money and is an extremely risky investment.
Bitcoin Has Lot of Prove
“Bitcoin and other cryptocurrencies are yet to establish themselves as reliable stores of value,” said Richards. “This is most obvious in a comparison of the volatility of Bitcoin as opposed to national currencies like the Australia dollar. Using cryptocurrencies in Australia is just so trivial it doesn’t have an affect and I think we can assume that will be the case for a long time.”
As an economist who tested different payment methods, previously owned a “small amount” of Bitcoins and has even found a Sydney cafe willing to accept Bitcoin in exchange for coffee.
The RBA’s head of payments policy, however, acknowledged that, while there are many risks with cryptocurrencies and blockchain technology, they are “fascinating developments” when it comes to payments and economics.
Although the RBA has been analyzing cryptocurrencies for over five years, Richards believes cryptocurrencies do not raise major concerns and are not significant threats to the bank since there is a relatively small number of active people in the cryptocurrency community.
While the cryptocurrency industry has a total market capitalization of $250 billion, Richards mentioned “to put this in context, the global equity market is valued at around $80 trillion and the global money supply is something around $15 trillion for currency and $90 trillion for broad money.”
Australians Unlikely to Adopt Cryptocurrencies
Richards is fairly confident that the volatile nature of cryptocurrencies will prevent its mainstream adoption as a medium exchange, especially since there are more stable, trusted, and regulated fiat alternatives.
He even noted, while countries which were prone to financial disruption may use cryptocurrencies, these cryptocurrencies are not being used in a similar manner to the US dollar.
” What we have seen, is that countries with less developed financial infrastructure are more prone to disruption,” said Richard. “But with cryptocurrencies, unless people want to transact and hold these cryptocurrencies, then they still have to get in and out of their domestic currency.”
He mentioned that many countries that do not trust their domestic currency use the US dollar instead of cryptocurrencies. He warned others that Bitcoin and other cryptocurrencies are extremely risky investments and are not useful as a medium of exchange. While Richard managed to find a Sydney cafe open to accepting Bitcoin, he noted not many of them exist.
Australian and New Zealand Rule Out State-Issued Currencies
According to Reuters, Richards gave a speech in Sydney where he commented on how the structural flaws and vulnerabilities of Bitcoin and existing cryptocurrencies could bring more damage than benefits to existing banking systems. He also revealed a Central bank-backed cryptocurrency token is not the RBA’s main priority, as is also the case for other advanced economies’ Central Banks.
The Reserve Bank of New Zealand (RBNZ) also responded similarly. While the RBNZ is open to blockchain technology, they’re unsure whether a Central Bank digital currency will provide clear benefits for the nation. Geoff Bascand, the Deputy Governor of RBNZ also mentioned that, while cryptocurrencies could distribute money in a more efficient, safer, and cheaper manner, they could during periods of financial instability, increase the likelihood of bank runs.
“A breakdown in the financial system can cause enormous economic and social harm,” said Bascand at an Auckland conference. “We could not issue a digital currency if it might undermine financial stability. The payments’ industry is dynamic good. But the Reserve Bank must be a considered prospector in the exploration for digital currency benefits – we have New Zealand’s currency and financial system at stake.”