RBA sees "potential" in stablecoins and CBDCs

The Reserve Bank of Australia said stablecoins and other emerging business models and technologies have “potential to deliver significant benefits” but noted data collection on central bank digital currencies could be difficult if services are delivered via non-banks.

In a submission to an inquiry into a new bill for regulating digital assets, which was introduced to parliament this past April, the RBA said that stablecoins and other such digital assets "raise important payments policy issues.”

Stablecoins, a type of cryptocurrency tied to a commodity or fiat, “have often been used as a ‘bridge’ between national currencies and the crypto ecosystem”, and are “increasingly considering a broader range of use cases," the submission states.

“Stablecoin activity in Australia has been relatively limited to date, although there is potential for stablecoins to play a more prominent role in the financial system in the future.

“Some banks, for example, have been exploring the use of stablecoins for facilitating cross-border payments and settlement of tokenised asset transactions.”

The RBA said it “supports the development of regulatory arrangements for stablecoins that support innovation while providing appropriate safeguards and protections for investors and users.”

It listed work on a regulatory framework for crypto-assets that is being currently led by the Treasury, with backing from the Council of Financial Regulators and other regulators

The RBA said “risks posed to users of payment stablecoins can be similar to those posed by certain stored-value facilities, including the risk of user losses due to the failure of the issuer to meet their obligations”.  

“The RBA strongly supports the development of a modern, risk-based regulatory framework for payment service providers, including stored-value facilities and payment stablecoin arrangements," it said.

The bill before parliament proposes, among other things, to collect data on foreign central bank digital currencies (CBDCs) from authorised depost-taking institutions (ADIs).

“The extent to which this would provide visibility over the use of foreign CBDCs by Australian residents would likely depend on design features, including the way in which Australian residents may access the foreign CBDCs," the RBA said.

“For example, if ADIs were involved in the provision of digital wallet services for foreign CBDCs, then it is possible [they] would have data on their use by Australian residents.

“However, if these services were also provided by non-ADI entities (e.g. bigtechs, fintechs or foreign central banks) then collecting data from ADIs alone would not provide a full picture of Australian residents’ use of foreign CBDCs.”

The RBA said it is possible that requiring banks to report extra “data to ASIC and the RBA may not necessarily achieve the objectives outlined in the bill”.

“Further consideration could be given to appropriate mechanisms to monitor foreign CBDC use in view of emerging design and other features," it said.

The RBA is already “actively engaging in CBDC research but has not made any decision about whether to issue a CBDC in Australia.”

The RBA and the Digital Finance Cooperative Research Centre (DFCRC) pilot project is exploring the use cases of CBDCs, and recently released a sample of submissions by industry participants.