Stablecoins Could Play ‘More Prominent’ Role in Economy: Australian Central Bank

The Reserve Bank of Australia has published its submission into an inquiry for a digital assets bill, which seeks to regulate crypto exchanges, custody services and the issuing of stablecoins.

Lodged in late May, the central bank’s submission focused heavily on stablecoins. The RBA sees the potential in the new form of currency while recognizing they need a strong regulatory framework.

“Stablecoin activity in Australia has been relatively limited to date, although there is potential for stablecoins to play a more prominent role in the financial system in the future,” the bank wrote. 

“The RBA supports the development of regulatory arrangements for stablecoins that support innovation while providing appropriate safeguards and protections for investors and users.”

Even though the RBA said stablecoin activity is limited right now, it mentioned that across jurisdictions — not just in Australia — governments are considering regulation based on the possibility that stablecoins could “become widely used for payments.”

The RBA also commented on central bank digital currencies (CBDCs), making clear that no decision has been made on implementation of a digital Australian dollar. It is however “actively engaging” in research on CBDCs. 

Some of that research led the central bank to another potential use case. The RBA pointed out that most of the nations that have issued CBDCs (overwhelmingly Caribbean countries) use them to “improve the efficiency” of their domestic payment systems. 

The RBA sees a world where CBDCs could be used by people outside of the currency’s country of origin.

“It is possible that in the future, CBDCs could be issued to, or accessible by, non-residents, and potentially used outside of the issuing jurisdiction,” the central bank wrote. 

Australian access to foreign CBDCs

The RBA also provided some insight into the bill’s proposed method of getting actionable information about how Australians would use foreign CBDCs.

This would involve collecting data from authorized deposit-taking institutions (ADIs), such as banks and credit unions.

However, if digital wallet services for CBDCs were provided by institutions other than banks or credit unions, like Big Tech, financial tech or foreign central banks, the RB

A pointed out that the government wouldn’t be getting the entire picture of how foreign CBDCs are being used by its citizens. 

The RBA was decidedly more neutral in tone than Kenya’s central bank, which said last week “the allure of CBDCs is fading” on the global stage. 

Even though the RBA isn’t completely sold, there is no denying that advanced economies around the world are taking a strong look at the potential of a digitally issued government currency. 

Seven central banks, including the Fed, the Bank of Japan, the European Central Bank, and the Bank of England, partnered with one another to write a paper on CBDCs in late May.