Sounding an alarm against the rising popularity of cryptocurrencies among fellow nationals, the chief of Reserve Bank of Australia, Philip Lowe, has said that people should be cautious while investing in digital currencies, including the category of stablecoins, among others.
Welcoming the government’s decision to implement new financial regulations that are expected to strengthen the flow of legitimate money in the system, Lowe said that privately issued money and currencies usually end in the hands of the illegitimate stakeholder and can result in financial instability for the country. However, Lowe also said that he expects digital currencies to play an increasingly more relevant role in everyday transactions even as traditional payment methods and their importance are on a constant decline.
Giving an example, the chief of the bank said that withdrawals from the ATM machines in the last six months were around 30% lower than the transactions recorded in the same time period three years ago. It is very much clear from the data that although the importance of banknotes in financial transactions isskeptical still intact, the overall trend seems to be on the decline as far as the usage of fiat currency is concerned.
It is also important to know that Josh Frydenberg, Treasurer, Reserve Bank announced yesterday that the bank is going ahead with the sweeping reforms related to the regulations regarding the financial and transaction systems in the country. Interestingly, half of the population in Australia makes use of digital wallets, and top policymakers in the government and Reserve Bank foresee that the next revolution in the financial and banking system will lead to the bypassing of traditional banking and accounting system of the country.
Dr. Lowe believes sovereign currencies were likely to remain dominant in three ways: through central bank digital currencies, privately produced stablecoins tethered to the value of a sovereign currency like the Australian dollar.
The RBA head is sceptical that pure cryptos could be used for regular payments. Dr. Lowe warned that a private sector DeFi model based on stablecoins posed hazards to consumers and that the financial system needed to be handled by adequate regulation. Considering the absence of necessary consumer safeguards, he advised cryptocurrency investors to exercise caution.