The use of digital currencies remains “relatively limited in Australia, as elsewhere,” stated Tony Richards, head of the Payments Policy Department for the Reserve Bank of Australia (RBA). “Digital currencies do not currently appear to raise any pressing regulatory issues.” The stance taken by the RBA contrasts with positions recently taken by regulatory counterparts in Indonesia, Vietnam, China, and Lebanon – all of which have moved to ban or heavily restrict cryptocurrency.
Richards’ statement was part of a speech delivered with his colleague David Emery to the Australian House of Representatives Standing Committee on Tax and Revenue on October 27.
Concerns over money laundering, capital flight, speculative token offerings and terrorist financing are influencing many agencies around the world to oppose digital currencies. Though Richards admits that “cryptocurrencies can serve as a means of payment in the illicit economy,” he argues that cautious stewardship of banking and payments systems will accommodate new technologies while proving insurance against gross abuses.
“The increased use of electronic payments means more transactions will go through visible channels,” said Richards, pointing to the transparency created by distributed ledger technology. “Distributed ledger and blockchain technologies underlying them have potential for widespread use in the financial sector and many other parts of the economy.”
Richards also discussed Australia’s soon-to-launch New Payments Platform (NPP), developed from research conducted between 2010 and 2012 and scheduled to begin in 2018. The platform relies upon connective tissue that is not DLT-based, but employs a “distributed clearing” protocol in which validation and confirmation of payments are undertaken on a distributed peer-to-peer network and then processed centrally through the reserve bank.
However, NPP may be an interstitial step toward more widespread adoption of blockchain. Richards alluded to innovations pushed for by Australian FinTech companies, saying that the entity responsible for managing the platform, NPP Australia Ltd., “is reaching out actively to encourage the development of new services that will use the NPP. This outreach is directed in particular at non-traditional players in the financial system.”
Cheng-Yun Tsang, a research fellow with the University of New South Wales Sydney Law and an assistant professor at the College of Law, National Chengchi University in Taipei, Taiwan, writes in an analysis of the NPP that “it is also noteworthy to observe how it will be impacted (or upgraded) by emerging disruptive payments innovations such as the distributed ledger technology (or the blockchain technology). The platform’s distributed-clearing feature makes it potentially compatible to the blockchain infrastructure and therefore opens the possibility of turning the country’s payments system into the world’s first national Internet of Values.”
Additionally, it should be noted that several FenTech companies, such as FlashFX, AgriDigital, and Othera, have approached FinTech Australia, a state-run industry advisory group, with proposals for the Digital Australian Dollar (DAD) in an effort to steer the RBA toward a national digital currency. The RBA has taken no official role in such an endeavor, although it will observe initiatives.