By CCN Markets: After ten years, the Reserve Bank of Australia has decided that Bitcoin and other cryptocurrencies don’t pose a threat to Aussie dollars or other forms of fiat payment.
The RBA concludes, after reviewing everything it knows about cryptocurrency, that it’s “difficult to envisage” an outbreak of Bitcoin users in the down under.
It’s on cryptocurrency to be more attractive and useful than traditional payment methods. People will prefer the easier, more familiar world of debt-based currency until this is the case.
To maintain the status quo, RBA says, rulers need only worry about keeping the fundamentals of the Australian dollar in place –
“As long as the Australian dollar continues to provide a reliable, low-inflation store of value, and the payments industry continues to work on the efficiency, functionality, and resilience of the Australian payments system, it is difficult to envisage cryptocurrencies presenting a compelling proposition that would lead to their widespread use in Australia.”
The article, published on the RBA’s website Thursday, begins with the assumption that cryptos will struggle to achieve mass adoption. It studies why “Bitcoin is unlikely to become a ubiquitous payment method in Australia.”
Mass adoption is a broad term not used much in the article. Instead, they refer to “widespread usage.”
Bitcoin mass adoption may not appear in the form of massive transaction activity. It may be safer to measure the adoption rate of Bitcoin by the number of people holding it.
For RBA, though, the focus is on why people decide which money they’re going to spend.
Do cryptocurrencies have the properties necessary to displace fiat currencies? The bank thinks not.
Lacking prejudice, the bank gives a simplistic portrait of Satoshi Nakamoto (that Bitcoin is digital cash rather than digital gold):
“As identified by Nakamoto, the purpose of Bitcoin was to act as a peer-to-peer payment mechanism. In practice, its use for this function has been limited. However, it has seen significant use as a vehicle for speculation. This was particularly the case in late 2017 when there was a very considerable increase in the price of bitcoin, along with most other cryptocurrencies. […] Following this speculative episode, prices fell dramatically from their peaks, leaving many purchasers of cryptocurrencies with capital losses.”
From there, RBA talks about monetary properties and concludes that while Bitcoin has innovated, so has fiat.
Whether decentralized technology takes off in Australia depends on a number of factors. For one thing, the volatility of value across cryptos makes it difficult for merchants and consumers to use.
“As discussed above, the price volatility of cryptocurrencies such as Bitcoin is likely to have inhibited their use as a payment method (that is, a means of exchange). If it is difficult or impossible for merchants and consumers to know what a cryptocurrency will be worth from one moment to the next, then it will be unattractive for most parties to price, or buy, goods and services in that cryptocurrency and accept payment in the cryptocurrency. Similarly, high price volatility makes cryptocurrencies a poor store of value.”
RBA systematically breaks down the perceived benefits of cryptocurrency and points out how they are either over-stated, overrated, or not aligned with reality. Censorship resistance, for example, is impacted by a world full of regulators and governments – it “raises challenges for regulatory authorities.”
RBA agrees with large swaths of the crypto community as to what the two main problems for crypto are: scaling, volatility, and ease of use. While several initiatives including the FIO Protocol and the stablecoin movement are in progress, it would be dishonest to say these issues are well in hand. On the subject of stablecoins, RBA says:
“[E]ven if the concerns about the credibility of stablecoin issuers and their coins are resolved, it is not clear that there would be material demand (at least for legitimate purposes) to pay with, or accept, stablecoins over conventional payment methods linked to deposit accounts at commercial banks.”
The global consensus on cryptocurrency is finally developing.
Governments, including Russia, the United States, China, and Australia are finally getting around to creating regulatory frameworks. On crypto, Australia has been more vocal than other world governments, even sending taxpayers a friendly reminder to include their crypto on their taxes.
Australia has a unique role in cryptocurrency. Bitcoin core contributor Gavin Andresen was born there (as Gavin Bell).
More importantly, the Australian Tax Office helped bring Craig Wright to the public eye. As CEO of Hotwire PE, Wright attempted to establish the world’s first Bitcoin-based bank but encountered too many problems with the Aussie Tax Office.
The next year, following reports from Wired and Gizmodo, the Australian government raided two of Craig Wright’s business locations, raising headlines and beginning the saga of Wright versus Bitcoin Core.
This article was edited by Samburaj Das.
Last modified: June 25, 2019 10:10 UTC