With the dust still settling on the bitcoin boom, questions are being raised as to whether it stands a chance in this country.
A senior Reserve Bank official believes that the stability of the Australian dollar will make it difficult for bitcoin to be widely accepted here.
Dr Tony Richards, who has owned ‘a small amount of bitcoin’ since 2014, states that digital currencies outside the control of traditional institutions could have practical applications, but this is unlikely in Australia.
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If you don’t believe him, you only need look at the RBA’s view on it.
The usage of bitcoin in Australia is currently so restricted that the RBA does not see it having any impact on monetary policy or the stability of the financial system.
‘When a country doesn’t have a credible currency, then people might look for other ones,’ said Dr Richards.
This isn’t the case for Australia.
Australia is the 13th largest economy in the world, but what really benefits our dollar is that it’s the 5th most traded.
That mainly comes down to one thing. Australia trades internationally. A lot.
As Dr Richards continued,
‘Whether those are cryptocurrencies or something like the US 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.’
Bitcoin is still extremely volatile
The price of bitcoin has been all over the place. In December of last year, bitcoin hit its peak of around $27,000. Currently, it’s sitting at around $8,400, down nearly 70%.
Now, I’m not trying to say that volatility is the be-all and end-all. In fact, it’s a necessary evil. People don’t avoid the stock market due to how volatile it can be; it comes with the territory.
However, bitcoin isn’t the stock market. Bitcoin is a digital asset. One that has not been backed by any form of government.
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Nevertheless, the RBA are keen to talk with blockchain experts about the currency, and about the technology that comes with it.
The blockchain is an undeniable record of transactions that have been dispersed across a network, rather than just being in a single location. This helps with problems such as damage, fraud and loss of information.
From this alone, we can see that the technology behind bitcoin can, and probably should, have a place in our financial world.
Whether the same thing can be said about bitcoin itself, only time will tell.
For Money Morning