The central banks of Australia and New Zealand announced on Tuesday that they would not issue official cryptocurrencies anytime soon, warning the volatility of the digital currencies could do more harm than good to the banking system.
According to a report from Reuters, the Reserve Bank of Australia (RBA) said that cryptocurrencies had not proven their worth as reliable stores of value or means of payment because of their volatility and vulnerability to hacking.
Commenting on the announcement, Tony Richards, head of the RBA’s payment policy stated: “nine years after its launch and about five years since it entered the public consciousness, bitcoin continues to have structural flaws that make it unsuitable for many uses, many of which stem from its inefficient verification process.”
Richards also added that, given the low usage of cryptocurrencies in Australia, they wouldn’t have any significant impact on the RBA’s oversight of monetary policy and the banking system.
The Reserve Bank of New Zealand (RBNZ) said it was unsure as to whether an official central bank digital currency would bring conclusive benefits. It did, however, say it is open to exploring new technology.
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RBNZ Deputy Governor Geoff Bascand pointed out that digital currencies could make the distribution of money safer and cheaper. Nonetheless, they could also increase the likelihood of high levels of withdrawals, known as bank runs, during periods of financial instability.
“A breakdown in the financial system can cause enormous economic and social harm. We could not issue a digital currency if it might undermine financial stability,” he said.
The influence of cryptocurrencies is growing, and in March, finance leaders of the Group of 20 major economies agreed to begin attempting to regulate the industry. However, due to the difficulty of agreeing on a synchronized approach, at the moment regulation is currently dependent on each country.
In addition, the wild price swings and the ability to hack cryptocurrencies have made central banks wary.
Richards suggested that central banks from major economies are not yet ready to adopt cryptocurrencies into their policies: “based on our interactions with our counterparts in other countries, it is also not front of mind for most other advanced economy central banks.”
Currently, Sweden has been the only other major economy to announce they are looking into issuing their own digital money, as the country continues to make great efforts to shift away from cash.