The Reserve Bank of Australia (RBA) governor, Philip Lowe has outlined what the future holds for the Australian currency, and it might be a digital token.
As digital wallets are replacing physical wallets and the use of cash is dwindling, Lowe flagged the possibility that token or account-based forms of currency might soon be favoured over cash. And the RBA might be readying itself to jump in on the action.
However, he is "sceptical" that cryptocurrency will disrupt the Aussie dollar.
So, what might the future of the Australian currency and monetary regulation look like? Here's what Lowe thinks.
Will the RBA ditch cash for a digital token?
Lowe spoke to this year's Australian Payments Network Summit on Thursday.
Lowe welcomed the support of regulators and government moves to control the payments sector.
He also flagged the increasing use of digital wallets. The governor said Australians are enthusiastically adopting digital wallets, so digital forms of currency might be the next big hit.
In fact, the RBA may start issuing and backing digital tokens in the future – just like it does with banknotes.
Lowe commented: "This would be a form of retail central bank digital currency (CBDC) – or an eAUD."
"This could allow day-to-day payments to be made by moving tokens around rather than moving banknotes or value between bank accounts," he said.
While there hasn't been public pressure for a digital token, or an eAUD, to replace cash just yet, a case for the switch could evolve quickly. This is particularly because tokens might offer a lower-cost solution for certain payments.
Lowe said the RBA is looking into the technology needed to facilitate a shift to a token-based digital currency:
We are working through the relevant technical issues, as well as the broader policy implications of any shift away from a payments system based on the movement of value between bank accounts, to one that uses tokens. As part of this effort, we are planning to work with Australia's new Digital Finance Cooperative Research Centre. We will also be working with the Treasury on these issues.
Will cryptocurrency be king?
Unfortunately for crypto bulls, Lowe doesn't think crypto will ever be used for general payments in Australia.
Lowe said:
It is likely that the asset used for the settlement of most transactions in the economy will remain some form of secure fiat currency with a stable value, rather than cryptocurrency with a volatile price.
Though, there's still a role for the likes of cryptocurrencies such as Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE). The currencies can help boost innovation, and Lowe notes there's value in experimentation.
Could another body regulate an Australian token?
Lowe also said a digital token, or eAUD, could be issued and backed by another entity. That entity would be in charge of creating a 'stablecoin'.
Though, stablecoins would need to be backed by "high-quality assets" and meet strong safety and security measures.
There might even be multiple stablecoins, with each being exchangeable for another.
