(Bloomberg) — Reserve Bank of Australia Governor Philip Lowe said there was currently no strong need for a central-bank digital currency, but cautiously welcomed the possibility of one being created in the future.
Lowe’s remarks come after Treasurer Josh Frydenberg said the government was weighing plans for such a currency as part of a wide-ranging overhaul of the nation’s payments system. The central bank chief said Australia already had a fast and efficient electronic payments system in place.
To date, “we have not seen a strong public policy case to move in this direction,” Lowe said in a speech at a payments summit on Thursday. “It is possible, however, that the public policy case could emerge quite quickly as technology evolves and consumer preferences change.”
The RBA is working through the relevant technical issues, as well as the broader policy implications of any shift toward digital tokens, Lowe said. He conceded there were advantages if such tokens were backed by the central bank, and said he welcomed the Treasurer’s announcement on Wednesday.
Responding to questions after the speech, the governor said there was no timeframe for when a central bank digital currency would potentially be launched in Australia, as it will likely take “quite a few years before we see anything more than small-scale proof of concepts.”
“There are deep issues about how it could affect the stability in the operation of our payment system,” Lowe said. “This is why it’s worth taking time.”
When discussing the different technologies that could become popular for payments, Lowe played down the possibility of the use of cryptocurrencies not backed by the RBA. He said he was “skeptical that we will head in this direction for general purpose payments.”
Lowe said that the asset used to settle most transactions will likely remain some form of “secure fiat currency with a stable value, rather than cryptocurrency with a volatile price.”
The governor also ventured into the possible use of so-called stablecoins, which wouldn’t be issued by the central bank but would be denominated in Australian dollars. He again highlighted the risks of such technology.
“If this is how the system develops, it will be important that these tokens are backed by high-quality assets and that they meet high standards for safety and security,” Lowe said. “A lesson from history is that privately-issued and backed money all too often ends in financial instability and losses for consumers.”
The RBA chief didn’t comment on monetary policy in the speech or the Q&A session.
(Adds further comments from Lowe from 5th paragraph.)
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