Reserve Bank says Australian dollars could come in digital form in future
Source: Gareth Hutchens

The RBA's Tony Richards can see an economy fuelled only by digital currencies. Photo: Louise Kennerley

It is entirely possible that Australian dollars will come in digital form in the future, breaking the link entirely between material notes and coins, the Reserve Bank says.

In a speech where he also flagged the end of the cheque, Mr Richards said the RBA had been watching the growth in demand for privately-established virtual currencies like Bitcoin, and believed there was a place for a central-bank-issued digital currency in Australia.

It thinks digital dollars will one day circulate in parallel with old fashioned banknotes and other existing forms of our national currency.

But given the risks around cybersecurity and cryptography, it believes full-scale issuance of digital currency in any country "is still some time away."



Tony Richards, head of the RBA's payments policy department, has told an audience in Sydney that the central bank is not "actively" considering introducing a digital currency in Australia yet, but it's possible authorities the bank will produce and distribute such a currency in the future.

"A plausible model would be that issuance would be by the central bank, with distribution and transaction verification by authorised entities, which might or might not include existing financial institutions," Mr Richards said.

"The digital currency would presumably circulate in parallel, and at par, with banknotes and other existing forms of the national currency."
Other countries are moving

Mr Richards said a few countries have already discussed the possibility of digital versions of their existing currency.

"Both the Bank of England and Bank of Canada have indicated that they are undertaking research in this area," he said.

"And a recent announcement from the People's Bank of China indicated that it has plans for digital currency issuance, though few specifics were provided."

"The Bank will be interested to see what proves to be possible and what proves to be problematic, as countries consider going down the path of digital currency issuance."

The rise in official interest in digital currencies comes as one of the most famous virtual currencies, Bitcoin, continues to be plagued by problems.

Last month, one of Bitcoin's lead developers, Mike Hearn, said in a blogpost that he was ending his involvement with the cryptocurrency and selling all of his remaining holdings because it had "failed".

"Despite knowing that bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly," Hearn said in his post on blog-publishing platform Medium.



Cheques are a dying payment form.

Cheques are a dying payment form. Photo: Source: ABS, APCA, BPAY, RBA

Mr Richards said cheques were continuing to decline and that decline would likely steepen once a new payments system was in place in early 2018.

"There is a lot happening in the payments industry at present, so my sense is that it would be premature to have a serious discussion about possibly phasing out cheques before the implementation of the New Payments Platform," he said.

"By early 2018 another two years will have passed and there will no doubt have been a significant further decline – based on current trends, a further 30 per cent or so – in cheque usage. By that point, more organisations and individuals will have further reduced their cheque usage."

The superannuation industry was reducing its cheque usage along with government departments. Even property transactions were increasingly occurring without a cheque changing hands, he said.

"With more and more older households now using the internet, their use of cheques is likely to continue falling. Indeed, I'm sure we all have a story about an older family member or friend who has recently bought or received a tablet or notebook and discovered the benefits of being online," he said.




Cash payments are also declining.

Cash payments are also declining. Photo: Source: RBA surveys

Mr Richards noted that cash transactions were also falling but, unlike cheques, demand for physical notes had increased.

A survey for the RBA has found that the use of cash has "declined significantly, with the proportion of all transactions involving cash falling from 70 per cent in the 2007 survey to 47 per cent in 2013", he said.

"The growing demand for holdings of cash suggest that it continues to have an important role as a store of value and there is some evidence – from demand for larger denomination notes – that this increased following the global financial crisis," he said.

"Significant parts of the population appear to remain more comfortable with cash than with other payment methods in terms of ease of use for transactions or transfers, as a backup when electronic payment methods may not be available, or as an aide for household budgeting."

Because of that demand the bank was undertaking a significant upgrade of the nation's stock of banknotes.

Read more: http://www.smh.com.au/business/banking-and-finance/reserve-bank-says-australian-dollars-could-come-in-digital-form-in-future-20160223-gn0zxx.html#ixzz4113MNqIv
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