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Cryptocurrencies Raise “Significant Issues” for Authorities: Australia’s Central Bank

Last Updated March 4, 2021 5:01 PM
Samburaj Das
Last Updated March 4, 2021 5:01 PM

Australia’s central bank addressed the growing popularity of cryptocurrencies like bitcoin in a parliamentary committee testimony.

The Reserve Bank of Australia (RBA) has joined a growing list of regulatory counterparts around the world in discussing its regulatory stance and views on cryptocurrencies. Earlier this month, the deputy director of the Philippines’ central bank spoke about the “benefit of using virtual currencies like bitcoin” by calling them “fast, near real-time and convenient.”

Speaking during a testimony  to the House of Representatives’ committee on tax and revenue on Friday, RBA’s head of payments Tony Richards said the central bank had noted “that Committee members have expressed interest in digital currencies or cryptocurrencies.” The official also revealed that the authority “has been closely monitoring” the topic of cryptocurrencies and blockchain technology “over recent years.”

The central bank had no concerns about the regulation of cryptocurrencies as payment instruments, the official revealed.

He stated:

From the Bank’s payments policy mandate, digital currencies do not currently appear to raise any pressing regulatory issues.

The Australian central bank’s position on regulation of cryptocurrencies as payment methods contrast to those of its regulatory counterparts in Indonesia and Vietnam who prohibited their usage as a recognized method of payment.

Richards addressed the “substantial increases” in bitcoin and ether prices this while suggesting their driving factors were “speculative demand” and their usage in initial coin offerings (ICOs), a radical new form of fundraising powered by cryptocurrencies. “the use of bitcoin and other digital currencies as an actual method of payment remains relatively limited in Australia, as elsewhere,” Richards added.

While revealing no regulatory concerns in their usage as payments, Richards told the parliamentary committee that cryptocurrencies “can serve as a means of payment in the illicit economy.”

“[T]heir use may have some implications for tax authorities and they raise more significant issues for authorities tasked with crime prevention and detection,” he stated.

Notably, the central banker admitted that attempts to regulate bitcoin as a cryptocurrency are likely to be futile and, instead, called for regulation of the industry facilitating it.

He said:

The distributed and cross-border nature of digital currencies like bitcoin means that regulation of the core protocols of these systems is unlikely to be effective.

Richards highlighted the measures taken by the People’s Bank of China, which enforced crippling regulation to effectively shutter cryptocurrency exchanges.

The official admitted to a lack of understanding toward the “longer-term prospects” of private digital currencies like bitcoin. However, the central banker also addressed the sweeping potential of cryptocurrencies’ underlying technology, the blockchain.

Richards told the parliamentary committee:

The greatest potential is likely to be in sectors where workflows involve lots of different parties with no trusted central entity, and where current practices are quite inefficient. Some frequently suggested financial sector use cases include correspondent banking and remittances, as well as trade financing.

A month ago, the Australian Securities & Investments Commission (ASIC), the country’s securities regulator, issued guidelines for operators and startups raising funds through ICOs.

“In some cases, the ICO will only be subject to the general law and the Australian consumer laws regarding the offer of services or products,” the ASIC stated while revealing it recognized the potential of ICOs to raise funds. “In other cases, the ICO may be subject to the Corporations Act.”

More recently, the Australian government revealed draft laws encouraging an “enhanced regulatory sandbox” for startups and ICO operators to operate without a full license.

RBA Sydney headquarters image from Shutterstock.