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Highlights
- RBA has been researching on Central Bank Digital Currency.
- The Central Bank of the Bahamas is the first central bank in the world to have their own full-fledged CBDC.
- Recently, the largest stablecoin Tether was fined US$41 million by the US Commodity Futures Trading Commission.
RBA head of payments policy, Tiny Richards said in an address to the Australian Corporate Treasury Association that the bank has been stepping up its research into Central Bank Digital Currency (CBDC), despite not being convinced that a strong policy case has emerged in Australia for a CBDC.
The national bank assumes that the country’s electronic payments system already provides a wide range of payment services to both businesses and households. Referring to the New Payment Platform (NPP), Mr Richards said “it was a major upgrade to the payments system, allowing real-time, data-rich, easily addressed account-to-account payments that can be made on a 24/7 basis.”
RBA was forced to flex its arms into the digital currency space as the adoption of cryptocurrencies and stablecoins is increasing, despite not being a legal tender as per the Currency Act 1965. “While the term ‘cryptocurrency’ may suggest that they are a form of money, the consensus is that existing cryptocurrencies do not have the key attributes of money”, said Richards.
Read More: Lost or Stolen Digital Currencies? Cryptohunters are on the Rescue!
Stablecoins on the other hand are a type of crypto-assets which are pegged against a real fiat currency (such as the US dollar) or a physical asset (such as gold), to reduce the price volatility. While this is an attempt to make them more “money-like” by backing them up with an underlying store of value, their credibility is still questionable.
Recently, the largest stablecoin Tether was fined US$41 million by the US Commodity Futures Trading Commission, as the regulator found misleading statements being made with respect to the underlying assets.
Mr Richards said RBA would definitely be having a centralised (‘permissioned’) governance arrangement, which is not the case with cryptocurrencies and some stablecoins. The transaction verification system would also be quite different for CBDCs and stablecoins, where the verification would rely on a very small number of trusted entities, unlike Cryptos where anyone can do verification using a pre-existing set of protocols.
Bottom Line
The concept of CBDCs is fast-growing across the economies. The Central Bank of the Bahamas is the first central bank in the world to have already moved ahead with the introduction of a full-fledged CBDC. RBA and other nations are also trying to explore the benefits and more importantly the mechanism of the digital version of their own fiat currency.
Watch: Is Ghana currency going digital?
