The Reserve Bank of Australia (RBA) will not intervene in oversight of digital currencies such as bitcoin at the moment, The Australian Business Reviewreports.
In reply to an Australian Senate inquiry, RBA’s representatives said in their opening statement that the limited use of the currency had no discernible impact on competition or risk to the financial system and that digital currencies represent a potentially important development.
“Digital currencies represent an interesting development in the payments and financial system landscape,” the RBA opening statement notes. “The concept of a decentralized ledger is an innovation with potentially broad applications for a modern economy.”
The Senate inquiry, which is being run by the Senate Economics Committee, has heard from a number of other witnesses from government and industry and will release its report into digital currencies later this year.
“Given the very limited use and acceptance of digital currencies in Australia, digital currencies do not currently raise any issues for the bank in terms of the bank’s monetary policy and financial stability mandates,” said RBA’s head of payment policy Anthony Richards. “The bank’s judgment is that the current very limited use of digital currencies means they do not raise any significant concerns with respect to competition, efficiency or risk to the financial system.”
“Accordingly, it is currently unlikely that any benefits of regulation would outweigh the potential costs,” added Richards. Therefore, the RBA will adopt a wait-and-see approach. If and when bitcoin or other digital currencies start to grow significantly and raise public interest concerns, the RBA will reconsider appropriate regulations.
But for the time being the RBA will trust market-driven solutions rather than engaging in costly regulations. Richards said that consumers should be careful not to misunderstand the degree of protection offered by regulation or oversight, which may lead them to exercise less caution than warranted when selecting and using service providers.
Jonathon Miller, co-founder of Bitcoin trading platform Bit Trade Australia, replied to the Senate inquiry, stating that the double taxation hitting Bitcoin trades in Australia – where a 10 percent Goods and Service Tax (GST) is applied to Bitcoin transactions – forces Australian bitcoin users to go offshore.
“That is 10 percent more than buying bitcoins in other jurisdiction,” he said. “The net effect has been a shutdown of some businesses and a reduction of volume and trade in this jurisdiction.”
Meanwhile, the Australian Digital Currency Commerce Association (ADCCA) has announced a new constitution. In an interesting twist, the new ADCCA constitution has been recorded on the Bitcoin blockchain.
“ADCCA used the Blockchain technology behind Bitcoin to certify the authenticity of its constitution,” ADCCA chairman Ron Tucker said. “Everyone can now easily determine which copies of our constitution are authentic.”
Tucker hopes that the constitution will allow ADCCA to develop more formal relationships with those who have a stake in the digital currency, and represent the wider fintech industry in the future.
“Today saw organizations such as Westpac and the Australian Banking Association give favorable nods to the work of ADCCA, including our work on ensuring all digital currency businesses comply with best practice standards on consumer protection,” he said.