One of the risks identified by the RBA was a potential threat to the entire banking system.
Jones revealed bank staff had examined what would happen to commercial banks if all Australian households transferred $5000 from their accounts into a Reserve Bank digital currency.
If no other actions were taken to protect the banks, this would reduce by up to 60 per cent the cash buffers they are required to hold to protect themselves from a run on their deposits, big falls in asset prices or broad economic turmoil.
“Central banks have examined measures that could forestall or limit the effects of bank runs involving central bank digital currencies, including limits on holdings, penalties on bank deposit withdrawals and negative interest rates on digital currencies in periods of stress,” he said.
“But what such measures have in common is an effort to restrict the use of central bank digital currencies, which to my mind at least, raises the question of whether the benefits of a central bank digital currencies would be forfeited in the process.”
RBA assistant governor Brad Jones says the case for a retail digital currency in Australia were not strong enough at present.Credit: Alex Ellinghausen
The CrowdStrike outage in July, which shut or slowed down the computer systems of millions of companies that used Microsoft Windows, and the threat of cyber-attacks has prompted calls for protection of physical cash.
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Jones said while some payment systems could work offline, moving to a digital currency could prove problematic during an electrical or digital system breakdown.
“Many countries are uplifting their crisis preparedness arrangements in response to national security threats and the risk of natural disasters. Social cohesion, not just economic disruption, is foremost in mind here,” he said.
“Some countries are also reconsidering the back-up role that physical cash might play for short-term transactional purposes, albeit access to and acceptance of cash still requires supporting offline capabilities.”
Jones said the RBA would prioritise its work on wholesale digital money, which would likely be used by major banks and financial institutions. It will undertake a three-year research program into the future of digital money.
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RBA digital currency ruled out over $6 trillion downfall fears
