RBA finds no compelling reason to join the race for digital currencies

The Reserve Bank of Australia (RBA) has adopted a cautious and sceptical stance toward a national digital currency (CBDC) and global stablecoins. This follows from a study cited by Cointelegraph, referencing local media.

The regulator pointed to the success of the recently launched New Payments Platform Australia (NPPA) with instant transactions 24/7/365 and PayID user identifiers.

The RBA’s view is that Australians’ strong preference for cash could also influence CBDC adoption. The regulator even pledged to keep banknotes in circulation for as long as citizens wish to use them.

Having considered the results of trials by the central banks of Sweden, Canada and China, which are at the most advanced stage of CBDC development, the RBA found no compelling reasons to base its approach on their experience.

In Sweden, cash use has almost disappeared. The Bank of Canada fears the emergence of Libra, but the RBA doubts that this stablecoin will gain regulator approval and become operational in the foreseeable future. The People’s Bank of China, in turn, relies on the popularity of private payment systems Alipay and WeChat.

The RBA believes that issuing a CBDC would entail large costs, including higher funding costs for commercial banks. The study notes that around 60% of their funding is in the form of demand deposits. Their loss could lead to a contraction of banks’ balance sheets as they reorient toward debt and equity markets.

The regulator also fears the risk of [simple_tooltip content=\”financial crisis that arises when many banks face an influx of people who mass-convert their distressed deposits into cash\”]banking panic[/simple_tooltip], which would be mitigated by the existence of a deposit-insurance system.

“After the introduction of CBDC in a crisis scenario, many bank customers may move their savings from banks to national digital currencies,” the study notes.

In August, the operator of the New Payments Platform Australia filed a lawsuit against Ripple for PayID trademark infringement.

Earlier Forklog published an article, in which it examined the progress of various central banks around the world in creating CBDCs.

Subscribe to ForkLog news on VK!