Should Australia issue an e- Australian Dollar?
Just a few days ago, Riksbank chief Ingves spoke about whether and how Sweden should issue an e-krona.
On the speech, JP Koning rightly remarked that the speech does not talk about the need for e-krona to be anonymous. JP had earlier educated us about two key features which led to acceptance of paper money: anonymity and censorship.
Now, Australian central bank chief Philip Lowe speaks about whether Australia should issue an e- Australian Dollar (eAUD). He also looks at usual attributes of an e-AUD says that though cash usage is declining but cash is likely to remain, whether banks will be key to issuing this money and so on.
As we have worked through the issues, we have developed a series of working hypotheses. I would like to use this opportunity to outline these hypotheses and then discuss each of them briefly. As you will see, we have more confidence in some of these than others.
- There will be a further significant shift to electronic payments, but there will still be a place for banknotes, although they will be used less frequently.
- It is likely that this shift to electronic payments will occur largely through products offered by the banking system. This is not a given, though. It will require financial institutions to offer customers low-cost solutions that meet their needs.
- An electronic form of banknotes could coexist with the electronic payment systems operated by the banks, although the case for this new form of money is not yet established. If an electronic form of Australian dollar banknotes was to become a commonly used payment method, it would probably best be issued by the RBA and distributed by financial institutions, just as physical banknotes are today.
- Another possibility that is sometimes suggested for encouraging the shift to electronic payments would be for the RBA to offer every Australian an exchange settlement account with easy, low-cost payments functionality. To be clear, we see no case for doing this.
- It is possible that the RBA might, in time, issue a new form of digital money – a variation on exchange settlement accounts – perhaps using distributed ledger technology. This money could then be used in specific settlement systems. The case for doing this has not yet been established, but we are open to the idea.
Expect lot more speeches like these from both Australia and other central bankers worldwide. Just like the dotcom times, expect to hear a lot of this letter “e” in coming times..