Why Bitcoin will never take off in Australia

RBA head of payments policy Dr Tony Richards said the stability of the Aussie dollar meant Bitcoin is unlikely to be widely adopted Down Under.

Dr Richards, who has owned “a small amount of Bitcoin” since 2014, said digital currencies outside the control of traditional institutions could have practical applications — but probably not in Australia.

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RBA head of payments policy Dr Tony Richards said digital currencies were unlikely to find practical application in Australia. Picture: AFP

RBA head of payments policy Dr Tony Richards said digital currencies were unlikely to find practical application in Australia. Picture: AFPSource:AFP

Local usage is currently so limited that the RBA does not see it having any effect on monetary policy or the stability of the financial system, Dr Richards said on Tuesday.

“When a country doesn’t have a credible currency, then people might look for other ones,” Dr Richards told an Australian Business Economists event in Sydney.

“Whether those are cryptocurrencies or something like the US dollar is another issue, but we in Australia have a perfectly credible currency called the Australian dollar; we’ve had low and stable inflation for at least 25 years; and the likelihood that we’d have significant adoption of an alternative currency seems to be pretty low.”

The volatile price of Bitcoin — a digital asset not backed by any government or physical unit — is also reason to doubt its worth as a store of value in a country that has a safe and stable banking system, Dr Richards said.

Dr Richards said people might look to digital currency in countries that lack a credible currency. Picture: AP

Dr Richards said people might look to digital currency in countries that lack a credible currency. Picture: APSource:AP

The price of bitcoin fell from about $US1,000 ($A1350) to $US250 ($A337) in 2014, the year in which Dr Richards bought it.

It was worth about $US6,250 ($A8433) on Tuesday, but that’s down nearly 70 per cent from its highest of nearly $US20,000 ($A26,986) in December.

“There is also a lot more risk in bitcoin intermediaries than there is in the supervised banks and financial institutions in which households can hold their Australian dollars,” Dr Richards said.

While Sweden’s central bank is mulling the merits of issuing its own digital currency, Dr Richards said the RBA is not yet actively looking at an e-dollar to operate alongside the traditional dollar.

Dr Richards said the RBA was not yet looking at an e-currency, and neither is New Zealand. Picture: AFP

Dr Richards said the RBA was not yet looking at an e-currency, and neither is New Zealand. Picture: AFPSource:AFP

Similarly, Reserve Bank of New Zealand deputy governor Geoff Bascand said on Tuesday it was too early to say whether a central digital currency would bring benefits.

Nonetheless, the RBA is keen to speak with experts in the blockchain technology that underpins bitcoin to see what applications it could have. The blockchain is an immutable record of transactions distributed across a network, rather than located at a single point that could be vulnerable to fraud, damage or loss.

“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,” Dr Richards said.

Some people think cryptocurrencies are a bubble waiting to pop just like the dot-com bubble in the early 2000s. Using that same analogy for cryptocurrency, what about blockchain, the technology behind Bitcoin and Ether? Here’s what you need to know.

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