Cryptocurrency usage in Australia is currently not large enough to raise policy concerns for the Reserve Bank of Australia (RBA), an official from the central bank said in Sydney yesterday.
The Reserve Bank has closely followed developments in the crypto sphere for about five years. It works with other central banks as well as interacts with big and small entities active in cryptocurrency, according to RBA head of payments policy Tony Richards.
But the bank's payments policy department hasn't yet found anything to be worried about - primarily because usage remains low.
"I have managed to find a Sydney cafe that accepted bitcoin for a coffee. But there are not many of them," Richards, who has kept a small bitcoin wallet since June 2014, said.
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The RBA feels the current level of usage doesn't challenge the bank's mandate (for example, to promote competition), monetary policy or financial stability mandate.
"There are only very limited links from cryptocurrencies to the traditional financial sector. Indeed, many financial institutions have actively sought to avoid dealing with cryptocurrencies or cryptocurrency intermediaries," Richards said.
"So, it is unlikely that there would be significant spillovers to the broader financial system if cryptocurrency holders were to suffer valuation losses or if a cryptocurrency system or intermediary was compromised."
Cryptocurrencies' combined global market capitalisation stands at US$250 billion as compared to US$80 trillion in global equity markets, US$15 trillion in currency and US$90 trillion in broad money markets, Richards said.
A digital dollar?
Richards also ruled out the possibility of an electronic Aussie dollar, at least for the time being.
"Our current thinking is that there would not necessarily be all that much demand for an additional form of money in normal times, though this would presumably depend partly on design decisions such as the interest rate (if any) that would be paid on this money," he said.
"But to the extent that there was significant demand, particularly if this occurred at times of financial uncertainty with households switching out of the banking sector, there could be significant implications for the bank's financial stability mandate.
"There would also be implications for the structure of the financial sector - for example, it could result in reduced financial intermediation. We would need to think through these implications carefully."