Cryptocurrencies will not receive wide use in Australia as long as the local financial system is efficiently working, the Reserve Bank of Australia (RBA) stated in an official document issued on June 20.
According to the notice authored by analysts from RBA’s payments policy department, there is “little likelihood of a material take-up of cryptocurrencies for retail payments in Australia in the foreseeable future” due to a number of reasons.
In the document, authors outlined the so-called “scalability trilemma,” which means that crypto can at best solve only two out of the three basic features such as decentralization, scalability, and security. The paper states that cryptos will always lack some of the features in some way, which purportedly makes this type of asset less attractive. The document reads:
“In practice, these trade offs are incremental; increasing the scalability of a blockchain does not require it to become entirely centralised or insecure, but more centralised or less secure.”
Another obstacle to the wide acceptance of crypto assets is increased volatility, the RBA said in the document. In this regard, the authors also cited the much-discussed crypto project by social media giant Facebook, which was officially unveiled on June 18. Built as a stablecoin backed by fiat currencies, Facebook’s libra is expected to solve the volatility issue, the authors wrote, while still losing in terms of decentralization by relying on a central body to buy and manage the assets that back the stablecoin.
In the document, the RBA cited particular cases of attempted stablecoin launches in Australia, claiming that stablecoins’ use for payments “has been very limited” as “has the supply of Australian dollar-linked stablecoins.” The financial authority cited the first Australian dollar (AUD)-pegged stablecoin AUDRamp, which went live in September 2018 but completely lost its worth after 137 tokens were issued. The authors also cited the TrueAUD stablecoin, launched in April 2019 by TrustToken, claiming that “no tokens appear to have been issued” to date.
The RBA authors conclude that cryptocurrencies have not developed enough to represent a “compelling proposition that would lead to their widespread use in Australia” as long as the Australian dollar provides a “reliable, low-inflation store of value.” They write:
“Developments to date have also not added sufficiently to the overall reliability, functionality and credibility of cryptocurrencies to make them an attractive alternative to established payment systems for everyday payments for the population at large.”
Recently, Australia’s securities regulator released new initial coin offering and cryptocurrency guidelines, considering cryptocurrency to be a financial product, which requires involved parties to get an Australian financial services license.