Australian Central Bank Governor Backs Privately Issued Digital Currencies

 Key Takeaways:

  • Regulated Consumer-focused digital currencies issued by private firms has benefits, says RBA Chief
  •  In late 2021, Governor Lowe flagged support for a retail form of digital currency, stating that tokens might circulate more freely in the economy.

Regulated Consumer-focused digital tokens issued by private firms likely could be better than central bank-issued digital tokens, the Australian central bank chief Philip Lowe said on July 17.

Lowe’s statement comes amid monetary authorities around the world looking to adopt Central Bank Digital Currency(CBDC) while still viewing Decentralized digital assets with suspicion. The Australian Central Bank Governor made statements while speaking in a panel discussion at the G20 finance officials meeting in Indonesia that was streamed online.

“If these tokens are going to (be) used widely by the community they are going to need to be backed by the state or regulated just as we regulate bank deposits,” Lowe said. He was referring to stablecoins which has come under criticism in recent days owing to the collapse of one stablecoin, TerraUSD, and its paired token Luna in May.

Commenting on why he believes privately issued Digital token would be better, Lowe said, “I tend to think that the private solution is going to be better – if we can get the regulatory arrangements right – because the private sector is better than the central bank at innovating and designing features for these tokens, and there are also likely to be very high costs for the central bank setting up a digital token system,” 

During the meeting, the Hong Kong Monetary Authority (HKMA) Chief Eddie Yue said more scrutiny of stablecoins could help reduce risks from DeFi, which aims to use computer code to remove the need for financial intermediaries from lending, investing and other financial activities.

This is not the first the Australian Central Bank Chief has voiced his interest in retail or privately owned digital currencies. In late 2021, the Governor flagged support for a retail form of digital currency, stating that tokens, rather than regular dollars, might circulate more freely in the economy. As with most central banks, the Reserve Bank of Australia is wary of promoting cryptocurrencies, given their volatile nature.

In 2021, describing three possibilities for a retail form of a CBDC, Lowe said he remained “skeptical that we will head in this direction [of cryptocurrencies] for general purpose payments.”

CBDCs are receiving wider reception in countries around the world. Recently, the Bank of Jamaica (BoJ) approved using CBDC-JAM-DEX as an alternative to the country’s cash economy. Earlier this year, India’s Union Minister of Finance Nirmala Sitharaman had said that Digital Rupee, the name of the CBDC in India, will be introduced using Blockchain and other technologies sometime in 2022-23.

 

Default image
Saniya Raahath

Newsletter

Crypto News, NFTs and Market Updates

Can’t find what you’re looking for? Type below and hit enter!