Australia Central Bank Considers Electronic Bank Notes

The central bank of Australia is in the midst of considering whether to create bank notes using blockchain, according to news from The Financial Times.

Philip Lowe, who serves as governor of the Reserve Bank of Australia (RBA), and who recently spoke at the Australian Payment Summit, said in remarks that the bank was weighing the “pros and cons” of issuing electronic Australian dollars. And, should adoption of those bank notes ensue, he advised it would be good practice to issue them through the Reserve Bank of Australia, as the digital notes could “coexist,” as the FT put it, with electronic payment systems operated by the RBA. The bank notes would, in turn, be distributed by financial institutions. Lowe said the central bank might also issue those dollars in electronic files or via tokens across dedicated systems designed for settlement.

Lowe said tokens might work alongside smart contracts, which might be used to enable automatic completion of “multi-stage” transactions. “This seems to be the general model that some people have in mind when they talk about ‘putting AUD on the blockchain,’ although other technologies might be able to achieve similar outcomes,” he was quoted by the FT as remarking at the conference.

The FT stated that the movement toward at least considering cryptocurrencies comes as cash use by the Australian consumer has dropped. The bank has found that, as of 2016, cash accounted for 37 percent of transactions, which is off from 70 percent over the course of roughly a decade.

Elsewhere in his remarks, Lowe commented on the price fluctuations of bitcoin itself, with a nod to what he called “speculative mania” — where, in actuality, the number of payments that can be handled is rather low. The lure of bitcoin, at least for the moment, he said, is one that is “likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions.”