RBA says no to Facebook’s crypto plans

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January 10 2020
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The Reserve Bank of Australia has stated that it will not allow Facebook’s stablecoin, Libra, while confirming it is mulling over a digital version of the Australian dollar.

During a submission before a Senate inquiry into the financial technology, the RBA was definitive that Libra should not be allowed to go ahead without serious regulations.

The inquiry heard that domestic demand for alternative currencies such as Libra was unclear, making efforts to regulate the coin unjustifiable.

“In Australia, it is unclear that there will be strong demand for global stablecoins even if they do meet all regulatory requirements, particularly for domestic payments.

“The [G7] cautioned that private sector global stablecoin initiatives should not be permitted to launch until all risks and regulatory requirements have been addressed. The bank is supportive of this view,” the RBA noted.

Domestically, the RBA argued Australia is already well served by a range of low-cost and efficient real-time payment methods, including NPP, that utilise funds held in accounts at prudentially supervised financial institutions.

“While Australians may not have been well served by banks providing cross-border payment services in the past, a number of new non-bank digital players have entered the market in recent years offering significantly cheaper and faster money transfer services,” the inquiry said.

The central bank also hit out at first-generation cryptocurrencies like bitcoin, given the extreme volatility of the coins.

“First-generation cryptocurrencies, such as bitcoin, the largest and most well-known cryptocurrency, exhibit significant price volatility, meaning that they are a poor store of value.

“Cryptocurrencies are rarely used as a unit of account, as goods and services are typically priced in the relevant national currency. While cryptocurrencies can be used as a means of payment, they are currently not widely used or accepted,” the inquiry found.

The central bank also raised concerns about a Central Bank Digital Currency (CBDC), noting the public has little demand for digital money given access and security provided for consumers through the Financial Claims scheme, which protects assets up to $250,000 per account.

“The bank is not currently considering a CBDC for retail use, but notes the availability of a wholesale settlement token based on distributed ledger technology could allow payment and settlement processes to become more integrated with other business processes,” the inquiry concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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