The Reserve Bank of Australia is not currently considering the issuance of a central bank digital currency, its payments policy department said Thursday, bucking the trend of most other central banks around the world.
Despite a decrease in the use of cash for transactions over the past few decades, the RBA said the amount of cash issued has continued to grow, “reflecting demand to hold cash for precautionary purposes and as a store of value.”
“Households and businesses are also well served by a modern, efficient and resilient payment system that has undergone significant innovation in recent years,” the central bank said.
The RBA said it would prove to be “very substantial and costly” to implement a central bank digital currency in order to design, build and operate the currency — “especially given growing cybersecurity threats and the rate at which technology is changing.”
The costs can’t be justified, the central bank said, when Australia’s electronic payments system still compares favorably with those in other countries; cash remains readily available and accepted.
“Furthermore, it is possible that there might be only very limited demand from households to hold and use CBDC,” the bank said.
The introduction of a retail central bank digital currency would likely also require a legislative change.
“The main conclusion is that the public policy case for issuing a general purpose CBDC in Australia is still to be made,” the central bank said.
Despite its reticence to issue its own digital currency, the RBA said it will be important to watch how other countries and jurisdictions implement their central bank digital currency projects.
In a recent survey by the Bank for International Settlements, of the 66 central banks surveyed, about 80% said they were engaging in work on a digital currency, though only 10% reported getting as far as pilot projects. The most aggressive promoter of a CBDC has been China, which is planning to test its “digital yuan” with hundreds of millions of people through large-scale trials with major banks and companies and is poised to release it publicly before the country hosts the 2022 Winter Olympics.
Last week, the governor of the Bank of France urged central banks across Europe to embrace digital payments and create a cohesive strategy for a central bank digital currency, saying that the continent faces “urgent and strategic choices” on the future of payments “that will have implications on our financial sovereignty for decades to come.”
“Let me be clear: We cannot allow ourselves to lag behind on CBDC,” said François Villeroy de Galhau.
Deutsche Bank said in a report earlier this week that central bank digital currencies have the potential to completely disrupt the financial system, giving central banks more monetary policy tools and significantly changing the role of commercial banks.
The RBA said this would likely result in an expansion in the central bank’s balance sheet, which, while having little implications for the operation of monetary policy, may have implications for the risk profile of the balance sheet and the functioning of financial markets.
“Given the bank’s current assessment of the likely benefits and risks, there may be benefits to waiting and to closely watching the experiences of other jurisdictions that are considering implementing CBDC projects,” the central bank said.