In the battle of regulation, people usually tend to believe that the traditional finance world is unaware of the positives and negatives cryptocurrency has. Well this doesn’t seem to be the case with Tony Richards, the head of the Payments and Policy Department and the Reserve Bank of Australia (RBA) who while speaking to Australian Business Economists Briefing on June 26, 2018 revealed he has been researching Bitcoin since 2013, created a Bitcoin wallet in 2014, and has even used the digital currency at a cafe.
Keeping an eye on the “new kid”
Mr Richards confessed that he is not an expert on cryptography and related technical matters but as an economist, who understands currencies and payments issues, he has been following developments in Bitcoin and other cryptocurrencies. He has provided his insights on Using Bitcoin, the blockchain technology and the price of a Bitcoin. According to him, he had used bitcoin in 2014 as part of his job to analyse new payment methods and having a first-hand experience of them.
Regarding the technology, to quote Mr Richards
“Even if one is quite sceptical of whether Bitcoin will have a significant role in the economy in the future, I think it is hard to avoid some admiration for its design”
With respect to price, his views were, that the run-up in prices over Bitcoin’s history has reflected demand from three main groups of early adopters.
1) those who were attracted by the innovative design and technology of the Bitcoin system
2) those who were looking for anonymity in their payments (including for shadow-economy or criminal activity)
3) those who we might call ‘crypto-libertarians’.
His opinion as a central banker
Mr Richards ended his briefing where he said that his speech shouldn’t be considered as that he has addressed the merits of cryptocurrencies as investments. He mentioned that Bitcoin and other cryptocurrencies are yet to establish themselves as reliable stores of value and if one decides to trade or use virtual currencies he is taking on a lot of risk with no alternative if things go wrong.
He also cautioned the audience regarding the risk associated with volatility of bitcoin prices as well as the security of exchanges dealing in them. To quote him
“Bitcoin and other cryptocurrencies are also currently not very useful as a medium of exchange for everyday purchases. These risks acknowledged, cryptocurrencies and distributed ledgers are fascinating developments both from payments and a broader economic perspective.
“The Reserve Bank will be continuing to study their implications and we are very interested in continuing to interact with entities, both large and small, that are active in this area.”
Mr Richards also said cryptocurrencies do not appear to raise any major concerns for the Bank given their very low usage in Australia. And on the topic of whether the Reserve Bank should introduce a new form of digital cash – an eAUD – he said it appears unnecessary at this stage.
Will the stance of Reserve Bank of Australia remain the same or will it reconsider bringing cryptocurrencies to status quo with the Australian Dollar? Do let us know your views on the same.