Australian central bank unsure about the digital currency rise

In a blow to the crypto community in Australia, the assistant governor of the country’s central bank – the Reserve Bank of Australia (RBA) – Michelle Bullock stated that despite the rise of crypto, the central bank was not a fan of the need to digitalize the Australian dollar, according to a report by the Australian Financial Review (AFR) on Wednesday.

I’m interested to consider what frictions these technologies [distributed ledger technology] are designed to address [but] in many cases I just don’t see what the point is,” Bullock stated at Sibos 2018, a banking and finance conference held in Sydney on Tuesday.

She added that among the ‘touted benefits’ of the adoption of virtual currencies, the ability to “lower bound” monetary policy is quite intriguing. Digital currency could allow central banks to operate a negative interest rate, which Bullock attested as, “an untested and quite a different idea.”

She pointed out that since cryptos weren’t constrained, people would run to central bank currency during a crisis. “That would take liquidity out of the system and center it in the central bank. That might make the management of liquidity and monetary policy more difficult in those circumstances,” she explained.

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 [the] 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,” she added.

Bullock admitted that digital fiat currency would be a “simplification,” but clarified that it was not a “requirement in the sense the inefficiencies we are seeking to resolve here do not reside in that last final exchange of cash in an existing digitised cash system with corresponding securities.”

Manish Kohli, global business head for payments and receivables at Citi, agreed with Bullock, saying that due to rapid innovation in the global payments field, central banks will not have to create digital currencies.

You put these three together, this combination is going to progressively make the need for digital central bank issued digital currency unnecessary,” said Kohli, as quoted in the AFR report.

One of the main attendees of the Sibos conference was Ripple. The San Francisco fintech giant has made strides in the payments space, with its partnerships with Spain’s Banco Santander and Japan’s SBI Holdings, among many others industry giants.

Also read: Majority of global financial institutions surveyed believe that central banks should develop central bank-issued digital currencies