(Bloomberg) — Australia is keeping an open mind on a central bank digital currency, a senior Reserve Bank official said, while adding it remains to be convinced there’s a case for one in a country with easy financial and cash access.
(Bloomberg) — Australia is keeping an open mind on a central bank digital currency, a senior Reserve Bank official said, while adding it remains to be convinced there’s a case for one in a country with easy financial and cash access.
RBA Assistant Governor Brad Jones laid out the pros and cons of a CBDC in a speech in Sydney on Thursday, saying a digital currency could enhance the resilience of the money and payment systems, particularly as disruptions from extreme weather events become more common.
“And cyber-induced disruptions represent a universal risk from which Australia is not immune,” he said.
Australia’s eastern seaboard has been hit by wild storms and flooding this year and climate scientists warn these events will become more common in a rapidly warming world. The country also recently suffered two high-profile hacking attacks involving SingTel Optus Pty Ltd and Medibank Pvt Ltd.
Jones also highlighted the most significant concerns around CBDCs for Australian policy makers:
- the potential to disrupt bank intermediation and monetary policy transmission in normal times; and
- the potential to give rise to bank runs in stressed conditions
He pointed out that 60% of Australia’s banking system funding is from low-cost deposits, saying there is a risk of a CBDC becoming the preferred source of liquidity holdings for households in normal times.
While the threat is not unique to Australia, Jones said, such an outcome would disrupt monetary policy transmission and could damp banks’ ability to lend and build capital buffers.
“The bottom line here is that much will depend on CBDC design choices, and there are many complex issues that would need to be carefully weighed ahead of any decision to proceed with issuing a CBDC,” Jones said.
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