A senior official at the Reserve Bank of Australia (RBA) has speculated that Bitcoin is unlikely to succeed in Australia because they already have a successful currency. The official compared the volatility of cryptocurrencies to stable fiat alternatives and cast doubt on Bitcoin as a store of value.
Bitcoin Is Too Volatile
RBA head of payments policy, Dr Tony Richards, said that although digital currencies could have practical applications, Bitcoin is unlikely to succeed in a country that already has a functioning fiat system in place. Speaking at an Australian Business Economists event in Sydney, he highlighted the characteristics of the Australian dollar, including low and stable inflation, reports News.com.
“When a country doesn’t have a credible currency, then people might look for other ones. Whether those are cryptocurrencies or something like the U.S. dollar is another issue, but we in Australia have a perfectly credible currency called the Australian dollar; we’ve had low and stable inflation for at least 25 years, and the likelihood that we’d have significant adoption of an alternative currency seems to be pretty low,” he said.
Richards criticized the volatility within the cryptocurrency market as Bitcoin falls to new lows in 2018. Following its peak of almost $20,000 in December, it recently broke the $6,000 mark which some are seeing as a strong buying opportunity. While the market is volatile, this is likely to be reduced as more money flows into the market and prices start getting linked to real-world purchases.
Richards took aim at ‘Bitcoin intermediaries’ such as crypto exchanges. He argued that they pose a greater risk for investor funds, especially in comparison with banks and financial institutions. This could be in reference to recent South Korean exchange hacks such as Bithumb, which saw thieves siphon off with $30 million or Coinrail for $40 million.
NewsBTC recently reported that crypto exchanges are struggling to get insurance as the industry becomes worried about the levels of risk. However, only a few crypto exchanges rely on insurance as it tops out around $5 million in potential payouts while crypto hacks have been in the regions of tens or hundreds of millions. So far, exchanges have tended to pay customers out of their own pocket, but they are not legally required to do so.
Dr Richards added: “There is also a lot more risk in bitcoin intermediaries than there is in the supervised banks and financial institutions in which households can hold their Australian dollars.”
This prediction comes days after Huobi launched the website for the Australian version of their crypto exchange on June 20. The exchange, set to go live after July 4, is their latest move to try to capture the global market for trading cryptocurrencies.
At a recent summit in London, Director of Europe, Lester Li said that they got the Australian licence quickly because Huobi hasn’t had any material incidents in the last five years. Huobi are are also targeting new markets including EU countries, Russia, India, and Vietnam.
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