Australian central bank could issue its own digital currency

February 26, 2016 - Bitcoin
Australian central bank could issue its own digital currency

At the Payments Innovation 2016 Conference in Sydney earlier this week, the Head of Payments Policy from the Department of the Reserve Bank of Australia (RBA), Tony Richards, discussed digital currencies and distributed ledgers. He disclosed that Australia could one day have its own digital dollars, citing that Bitcoin has stimulated “interest in the potential offered by distributed ledgers, extending to the possibility of central-bank-issued digital currencies.”

“Let me stress that the Bank has not reached a stage where it is actively considering this, but in the more distant future it is even possible that we may see a digital version of the Australian dollar.”

– Tony Richards, Head of Payments Policy Department, Reserve Bank of Australia

Richards expects to see the rise of electronic payment methods and whole new systems for payments to replace cash soon, such as Australia’s New Payments Platform (NPP) infrastructure. These innovations are being developed in conjunction with banks and other deposit-accepting financial institutions in response to the Reserve Bank’s recent payment innovation strategy, which aims to fill the hole left by the rapid decline of Australia’s usage of cash and checks. In comparison with other English-speaking economies, check usage in Australia is quite low today, according to Richards.

The number of checks written in Australia have fallen drastically over the last two decades. With this current decline, it is now accelerating downwards from around 50 checks per capita annually in the mid-1990s, to only six in 2015.

Cash usage is also falling, although unlike checks it has remained the most important payment method for low-value transactions according to the Central Bank’s most recent study in late 2013. However, it confirmed that the use of cash had declined significantly, with the proportion of all transactions involving cash falling from 70 per cent in the 2007 survey to 47 per cent in 2013. Meanwhile, the demand for holding cash has grown.

“As payment habits and processes become more digital and cheques continue to decline and become harder and more costly to use, there will be a requirement to transition cheques to more efficient and sustainable payment methods. Our initiative will deliver a collaborative approach to ensuring more convenient payment choices are made available to all users of the payment system, prior to the identification of an end date for cheques.”

– Tony Richards, Head of Payments Policy Department, Reserve Bank of Australia

Nationalized digital currencies were mentioned repeatedly at the conference, and on at least one occasion, accompanied by details about how to bring them into circulation and what role they would play in society. “A plausible model would be that issuance would be by the central bank, with distribution and transaction verification by authorised entities,” Richards explained and continued to describe how digital currency could “circulate in parallel (and at par) with banknotes and other existing forms of the national currency.”

Richards made clear his doubts about how privately-established virtual currencies such as Bitcoin could ever displace well-established, low-inflation national currencies in terms of usage within individual economies. He also acknowledged that Bitcoin has ignited widespread interest in blockchain technology to the point that countries are now exploring issuing their own digital currencies. 

In regards to Blockchain applications other than digital currencies, Richards recognized their potential applications in the settlement and security markets. His bank oversees clearing and settlement facilities, as well as licensing to operate such in Australia, so this was of particular interest to his organization.