Most people who exist within the crypto industry are hoping for it to receive widespread adoption and mainstream use in the next few years and there have been a few developments that have encouraged this vision such as JPMorgan’s announcement of their own crypto to Facebook releasing the whitepaper for their much anticipated Libra token to the current wave of institutional funds that are coming into the industry.
However, according to the Reserve Bank of Australia, this vision will not be actualized in Australia in the near future as long as the current financial system is working efficiently. This came via an official document that was issued on June 20, 2019, by the bank.
Not Coming Soon
The notice that was issued was authored by analysts from the reserve bank of Australia's payments policy department and it stated that there is a there is little likelihood of the material take off of cryptocurrencies for retail payments in Australian in the foreseeable future and this is due to a number of reasons the were outlined within the document.
One of the reasons outlined is the scalability trilemma which means that cryptos can usually only possess two out of the three basic required features such as decentralization scalability and security. According to the paper, most cryptos lack some of the features and this will make them less attractive to be used for widespread payments within Australia.
“In practice, these trade-offs are incremental; increasing the scalability of a blockchain does not require it to become entirely centralised or insecure, but more centralised or less secure,”
the report says.
Another issue was highlighted within the paper as an obstacle to widespread crypto use is the volatility of these assets. This has been discussed in the past as the crypto market is often quite volatile with a long lasting bear market occurring in late 2018 and lasting into 2019 and only just recovering and now the market seeing huge spikes compared to a few months ago. Just recently, when the Libra token was announced, it was stated that it would be backed up by fiat currencies which will help solve volatility issues but this will compromise the decentralization aspect as it would require a central body to buy and manage the assets that will work with the stable coin once, again leading back to the scalability trilemma.
The document also cited the use of stablecoins in Australia and states that stablecoins use for payments has been very limited and so has the supply of Australian dollar-backed cable coins. One example was given of the first Australian dollar-backed token AUDRamp that went live in September 2019 and lost all its value after 136 tokens were issued. The TrueAUD stablecoin was launched in 2019 but no tokens appear to be released thus far.
The concluding argument was that cryptos have not been developed enough that represents a compelling proposition that will lead to any widespread use within Australia as long as a typical Australian fiat currency provides a reliable and low inflation store of value.
“Developments to date have also not added sufficiently to the overall reliability, functionality, and credibility of cryptocurrencies to make them an attractive alternative to established payment systems for everyday payments for the population at large,”
the report says.