The Reserve Bank of Australia (RBA) has issued a briefing document in which it calls bitcoin a “limited” risk to the country’s payment systems. The document was published some time ago, but was only recently made public.
The briefing (which can be read at the bottom of this article) describes bitcoin’s method of confirming transactions as “an inefficient use of resources” and says that the digital currency faces an uphill battle in dislodging the current payments infrastructure:
“The appeal of low fees and fast transaction times are not themselves sufficient for the wide adoption of bitcoin as a payment system.”
Good understanding of bitcoin
Primarily an informational document, the briefing notes a number of risks posed by the potential widespread adoption of bitcoin to the RBA, including a “reduced ability to implement monetary policy”, a fall in revenue from the minting of money, and a potential to destabilise the financial system if there was a rush to sell bitcoins “because of a loss of confidence in the core bitcoin system or large third-party service providers.”
The document argues that a significant amount of computing power is wasted in the winner-takes-all race to mine blocks, and points out that the first-mover advantage, which makes it difficult for bitcoin to replace existing payment systems, also makes it likely that it will remain the pre-eminent digital currency.
If nothing else, the slightly out-of-date document, which includes references to Mt. Gox’s trading volumes, for example, shows a remarkably strong understanding of the ins and outs of digital currencies.
Government regulation around bitcoin, the document suggests, is born not from ignorance, but perhaps because they understand the implications all too well.
Reserve Bank of Australia image by Newtown Graffiti