The Reserve Bank of AU has stated that Bitcoin and other cryptocurrencies do have their benefits, but they are also with their flaws. Dr. Richards, who is the head of the bank, has stated that the central bank has in fact been following the policies and the technology in general. They have been doing this for around 5 years now and they are still unsure as to whether or not they should invest.
When a country does not have a credible currency, people might start to look out for other ones. It doesn’t matter whether it is a cryptocurrency or whether it is something like the US dollar, because it’s just what people do. In Australia however, the currencies are very credible and there is no reason for people to start looking into other options. Dr. Richards has stated that they have had a very low level of inflation for quite some time now. The chances of a significant adoption happening are very slim, so the idea of an alternative currency really is very low. In his speech, he has also come out to say that the idea of Bitcoin has certainly been highlighted, and that they still think that there are a lot of problems to be faced. He has also come out to say that the volatility of Bitcoin is something that they are not keen on. It has seen a 70% decline since it peaked in December and this means that everyone who holds it has a very high level of risk. He even went on to compare the volatility of this to the Australian dollar, saying that the comparison just cannot be made. He believes that Bitcoin is yet to establish itself as being a reliable store that can offer any form of value, and that the transactions that are made by the network in December can really not be compared to the transactions that it has the power to make. Dr. Richards also went on to say that the unconfirmed transactions that have happened in the past and even the fees are other problems that need to be addressed.
He is also a strong believer that there are problems with the scalability, and that the governance problems of the Bitcoin system really are not to be overlooked. This is especially the case when you are trying to deal with the capacity of the problem in general. Another problem is that the block limit is less than 1mb. There have also been a ton of hacks on the exchange, and that these have all been spaced out over the last few years. This shows that there is far more risk with Bitcoin when compared to any other currency out there. This is especially the case when you compare it to actual, real-world currency.
Australia’s own central bank may issue a digital form of currency but they would have to make sure that it doesn’t have the same flaws that Bitcoin does. Given the interest in the cryptocurrency, people are always asking the question, “should central banks accept this digital version of the currency they have in their pockets right now?” Dr. Richards has dismissed the need to have an issuance for any currency that exists right now. They have also explained that the majority of monetary transactions have already happened in a digital form. Use of physical cash went from being 70% to just 37% in the space of a few years. So for right now, at least, the consideration of having a digital currency should be put on hold. The money that is provided to the reserve or even the central banks is not something that a lot of people want to pursue. He did also agree that money on a distributed ledger would give people the chance to have programmable money. This would involve smart contracts and even the use of ledgers that are not from the bank. These risks all need to be acknowledged and there have been a ton of developments made so far. That being said, there still isn’t enough traction to really get the whole thing going.