Little need for a centrally managed digital currency in markets like Australia: RBA

Digital currencies are slowly shedding the reputational damage suffered in the early days of bitcoin when they were seen as the preferred currency of the black economy, managed through dodgy operators like Mt Gox.

However, as the technology underpinning bitcoin – blockchain – has become more mainstream, and with commitments from institutions such as the People’s Bank of China, central bankers around the world seem more comfortable interrogating the issue.

In an interview on Boardroom Media from the recent Morgan Stanley Disruption Evolved webcast, Reserve Bank of Australia assistant governor financial systems Michele Bullock was asked about the issue and acknowledged the discussions in the sector are ongoing.

“This topic keeps coming up with Sweden and China. China’s probably most far ahead, but Sweden also is reasonably advanced in thinking about central bank digital currencies.”

She reiterated the view of Australia’s central bank that it does not see the need for a retail central bank digital currency.

“Only around about three per cent of money out there in Australia is central bank issued money, cash. The rest of it is intermediated money. It’s held in financial institutions. So we already have electronic money.”

Bullock said the question is what additional purpose would a central bank digital currency serve that electronic money from financial institutions is not already serving.

“And we’re not really convinced that it does have a purpose in that way. Having said that, all central banks are looking at the issue actively. The Chinese, they have a different system over there in the sense that a lot of their electronic money, if you like, is in the Pays – WeChat Pay and Alipay.”

According to Bullock, “It’s effectively in a three-party system, so it’s a little bit different to drawing money out of bank accounts like we tend to do in Australia.”

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Source: Little need for a centrally managed digital currency in markets like Australia: RBA – Which-50