TodayĀ Reserve Bank of AustraliaĀ Governor Philip LoweĀ saidĀ the central bank is exploring the pros and cons of stablecoins as an alternative form of digital currency. His comments were made as part of a talk that touched on the Bankās central bank digital currency (CBDC) work.
Lowe stated, āWe are also looking at the pros and cons of an alternative form of a digital Australian dollar ā a payments stablecoin that is issued by the private sector, just as banks issue deposits. If we were to go in this direction, the payment stablecoins would need to be backed by a strong regulatory regime, just as applies to deposits.ā
In September, Australian SenatorĀ Andrew Bragg published a billĀ to regulate digital assets and stablecoins.
Like many other jurisdictions, Australiaās Council of Financial Regulators (CFR) is working on stablecoin regulation, asĀ reported in March. This is particularly focused on stablecoins used for general payment purposes.
One of Australiaās biggest banks,Ā ANZ, issued a stablecoinĀ around the same timeframe.
Last week, theĀ Reserve Bank of AustraliaĀ published a reportĀ on stablecoins confirming the regulatory work and highlighting the risks to banks. For example, if bank deposits are used as asset backing, a stablecoin run could trigger a bank run. Alternatively, if the backing assets are government securities, thereās a risk these markets could be destabilized in the case of a stablecoin run. Or banks could suffer reputational risks by providing stablecoin-related services if a stablecoin gets into trouble.Ā
Meanwhile, as mentioned by the Governor, Australia is working on an industryĀ pilot programĀ in a joint initiative with the Digital Finance Cooperative Research Centre (DFCRC). While many of the use cases appear to be more focused on institutional applicaWe hations, a wholesale CBDC, the DFCRC has confirmed it also covers retail CDBC.
On the topic of a retail CBDC, the Governor said today, āve an open mind as to whether a public policy case will emerge to go in this direction.ā Meanwhile, Assistant Governor Brad Jones explored some of the CBDC pros and cons in a speechĀ last week.