Reserve Bank of Australia governor Philip Lowe thinks bitcoin is mostly attractive to criminals and speculators but has acknowledged there could one day be an electronic Aussie dollar based on similar technology.
Dr Lowe on Wednesday said unregulated cryptocurrency was attractive to black market operators and that the central bank was not convinced the time is right to issue an electronic dollar to operate in tandem with physical banknotes.
But a blockchain-based so-called eAUD could eventually lead to more efficient, lower-cost business processes and payments, Dr Lowe said.
“It is possible that the RBA might, in time, issue a new form of digital money – a variation on exchange settlement accounts – perhaps using distributed ledger technology,” Dr Lowe said in a speech to the Australian Payment Summit in Sydney.
“The case for doing this has not yet been established but we are open to the idea.”
The eAUD would be used in specific settlement systems but, while bitcoin and many other cryptocurrencies and tokens on a public ledger are mined, the dollar would still be backed by the central bank.
“It is certainly possible that this type of system could lead to more efficient, lower-cost business processes and payments,” Dr Lowe said.
“My working hypothesis here is that such a case could develop, although we need to work through a range of complex operational and policy questions.”
Dr Lowe said the use of privately issued electronic tokens representing dollars was feasible, but history showed that people prefer to hold centrally backed currency in periods of uncertainty or stress.
“It is hard to see them being issued as cryptocurrency tokens under a bitcoin-style protocol, with no central entity standing behind the liability,” Dr Lowe said.
“So, while a privately issued eAUD is conceivable, experience cautions that there are significant difficulties and dangers associated with privately issued fiat money.”
Dr Lowe repeated the claim made by many financial institutions that bitcoin – which has increased in price from about $US800 at the start of 2017 to more than $US17,000 – was mostly attractive to criminals and speculators.
“When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions,” Dr Lowe said.
“So, the current fascination with these currencies feels more like a speculative mania than it has to do with their use as an efficient and convenient form of electronic payment.”