Cryptocurrency is not a fad, financial services minister Jane Hume has said, arguing that government and industry should not fear the rise of decentralised finance.
Hume, speaking at an Australian Financial Review summit on Monday, said cryptocurrency was “not going away any time soon”, regardless of people’s views on it.
“So as an industry, and as a government, we need to acknowledge this is not a fad. We should tread cautiously, but not fearfully,” she said, comparing cryptocurrency to previous technology disruptions.
“Don’t be the person who thought the iPhone would never take off because people would prefer to have their music and telephone on separate devices. Don’t be the person in 1995 who said the internet was just a place for geeks and criminals and would never become mainstream. And don’t be the person who argued that email was a passing fad.”
Her comments come just days after the Reserve Bank of Australia’s head of payments policy, Tony Richards, told the Australian Corporate Treasury Association he could see plausible scenarios in the future that would “challenge the current fervour” around cryptocurrencies. He said that could lead to a crash in the value of cryptocurrencies, which currently have a market value of $US2.6tn.
“Households might be less influenced by fads and a fear of missing out and might start to pay more attention to the warnings of securities regulators and consumer protection agencies in many countries about the risks of investing in something with no issuer, no backing and highly uncertain value,” he said.
Other factors, Richards said, could be the high use of energy in mining cryptocurrencies, and tax authorities and police agencies focusing on the anonymity cryptocurrencies offer, and the “on and off ramps” linking cryptocurrencies to the traditional financial sector.
Hume warned, however, that Australia should not risk being left behind.
“Decentralised finance underpinned by blockchain technology will present incredible opportunities – Australia mustn’t be left behind by fear of the unknown,” she said.
Richards said such a scenario where cryptocurrencies would crash would likely emerge if there were strong regulatory frameworks established for stablecoins – that is, crypto-assets that are more stable in value and tied to an existing asset.
Coins such as tether, USD coin and binance USD, for example, are roughly the same value as the US dollar.
Richards said that if central banks moved towards issuing central bank distributed currencies as stablecoins, it would offer faster, safer and more efficient transactions, which might change how people viewed cryptocurrencies.
The Commonwealth Bank announced earlier this month that it would allow customers to buy and sell up to 10 crypto assets through its banking app, in a trial to launch widely in 2022.
A Senate report on financial technology estimated that about 17% of Australians held cryptocurrency assets, however, Richards said he found the estimate implausible, and put it down to online surveys not being accurate.
“While it is hard to point to any firmer evidence on cryptocurrency holdings by Australians, some of the estimates out there are extremely surprising and may be symptomatic of the significant amount of hype and misinformation in this area,” he said.
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