The race to develop central bank digital currencies (CBDCs) is underway, but it seems the Reserve Bank of Australia may not be in the running.
As reported by Cointelegraph Thursday (Sept. 17), Australia’s central bank has viewed the issuance of such digital coinage with caution, and even a bit of skepticism.
One key reason: the New Payments Platform is doing just fine.
In notes on its most recent (August) meeting of the bank’s Payments System Board, the members said that “at present there is not a strong public-policy case for issuance in Australia, given that the electronic payments system in Australia compares very favorably with those in many other countries and access to cash remains good.”
But: The bank is keeping an eye on the experiences and progress of other nations, and still is researching its own technological and “policy implications” of wholesale forms of CBDC.
As for the ostensible reason for such digital coinage — to replace cash — the bank seems to state that there still is room for notes and coins in everyday financial life. Though the pandemic has spurred a decline in cash use and acceptance, according to the bank, and banks have “rationalized” ATM fleets, there still is “importance” in keeping access to cash in place.
Earlier this year, as noted by PYMNTS, the bank said it “established a small in-house Innovation Lab as a way to strengthen engagement with, and understanding of, new and emerging technologies that are relevant to its policy and operational responsibilities.” In at least some nod to the technicalities, back in January, the central bank envisioned that the digital currency might be issued via blockchain platform.
By stating there is no public policy urgency to issue a CBDC, the Australian bank puts a note of caution in a discussion that is global in scope, and where, in Europe, for example, there are other discussions of risk and reward. Over the past several days, for example, financial regulators from the European Union said there need to be strict controls governing central bank digital currencies in place — and Libra (among other private efforts) may present a threat to financial stability.
Bundesbank President Jens Weidmann said at a Berlin gathering earlier this month that “many people value cash very highly, and for legitimate reasons. It provides privacy, and its use does not necessarily depend on technical infrastructure,” he said.
ECB President Christine Lagarde stated at the even that as of yet there has been no decision yet to create a digital euro, though a task force’s findings are due to be presented within the next few weeks.
“An increase in protectionist policies” may present risks in a landscape where foreign payment service firms still are dominant, she said.
Separately, of course, the People’s Bank of China (PBOC) has said that a test of a CBDC rests with small retail transactions — not large-volume transactions. That approach differs from the “wholesale” payments explorations that are increasingly in focus in other countries. As has been widely reported, 80 percent of 66 central banks queried by the Bank of International Settlements (BIS) said they were working on CBDCs. In an interview with Karen Webster, Jim Cunha, senior vice president, secure payments and FinTech at the Federal Reserve Bank of Boston — discussing joint efforts between the Fed and MIT to explore infrastructure that might underpin digital dollars — said, “Anywhere where you have a cash transaction can be a possible use case.”