RBA Richards’ Warns Current Cryptocurrency Valuations Might Not Sustain

• Published on
• 18 Nov 2021, 01:19 PM

By Sophia Rodrigues

(Sydney, November 18, 2021)—Existing cryptocurrencies might have only niche use cases even if there were to be global policy action to deal with some concerns about their use, and therefore it is plausible their current valuations would not be sustained, a Reserve Bank of Australia official warned Thursday.

The RBA’s head of payments policy Tony Richards made the comments in a speech to the Australian Corporate Treasury Association. This is Richards’ last speech before he retires from the bank at the end of the year.

“If there were to be global policy action to deal with some particular concerns about the use of cryptocurrencies, plus the arrival of new stablecoins and CBDCs (Central Bank Digital Currency) that could safely meet the needs of a wide range of users, existing cryptocurrencies might then have only niche use cases, at best,” Richards said.

“If so -- and also reflecting that the relevant code is often open-source, publicly available and easily copied -- it seems plausible that current valuations of many cryptocurrencies would not be sustained,” he added.

According to Richard a range of factors could significantly challenge the current fervour of cryptocurrencies, resulting in reversal of speculative demand and unwinding of price increases of recent years.

Some of these factors are:

--Households might start paying more attention to the warning of securities regulators and consumer protection agencies in many countries.

--Very high energy use in mining proof-of-work cryptocurrencies could attract greater attention from governments and policymakers

--There could be greater focus on near anonymity and their potential use in facilitating financial crime and black economy.

--Contact: Sophia@centralbankintel.com