Cryptocurrencies such as Bitcoin have influenced many countries to seriously explore the possibility of issuing their own national digital currencies and central banks in many countries like U.S. and China are doing research on the opportunities, benefits and drawbacks that national digital currency could have on the economic situation of the country. It is believed that introducing a digital currency would help speed the shift towards a cashless society and it would reduce cost and boost productivity because businesses and individuals wouldn't have to manage cash or pay charges such as ATM fees.
Due to the bitcoin’s performance during the last year, it was speculated that Reserve bank of Australia (RBA) will be issuing digital dollars to allow money to move through distributed ledgers. However, recently the Australian Central bank has said that creating digitized versions of central bank money will make bank run much more likely during a crisis.
According to the RBA’s Assistant Governor, Ms. Michelle Bullock, the bank is not yet convinced that there is a need for a national digital dollar, however it is still open to considering wholesale applications for a digital Australian dollar. She further added that the system is currently working well, and the system does not need access to direct settlement to do lots and lots of business.
Recently, a new industry has emerged which uses technology to improve operations in finance and this industry is popularly known as Fintech. These Fintechs are putting pressure on the central banks all around the globe, to open up their payment infrastructure by making the real-time gross settlement system more accessible.
Last year, the founder of blockchain start-up AgriDigital - Ms. Emma Weston, proposed the creation of a new "Digital Australian Dollar" (the DAD) which will provide a more attractive option than using a cryptocurrency to move the payment. According to her if a digital version of a fiat currency is not possible, then they will have to go for other alternatives in the crypto space, but digital fiat currency is preferable because it will provide confidence, and protection from volatility.
Ms. Blythe Masters who is the CEO of Digital Asset has agreed with Ms. Michelle Bullock and told that while a digital fiat currency will certainly simplify things however it is not a requirement and paying for stocks is not where inefficiencies lie, and existing payment system is actually a highly efficient and high-speed exchange and she further told that central banks could try to issue national currencies directly on to a distributed ledger but the efficiency gain associated with it is not material relative to the other costs in the system. Some Central banks like Bank of Canada are experimenting with digital currencies and it created digital depositary receipts that tokenize both securities and central bank money.
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