Bank of Australia head mentions stablecoins

The Head of Financial Stability from The Reserve Bank of Australia, Jonathan Kearns, talked about issues facing banks and potential future changes for banks at a recent business forum in Sydney, December 16th. During his speech, he outlined banks' central role in the global economy as well as other economic topics, like liquidity, risk management and regulation. Mr. Kearns, after setting the stage, turned his attention to recent changes to Australian banks, but he also mentioned potential future changes that could be an entry point for digital assets.

He states that future drivers can be broken into three general areas, "The first is the general increased access to, and ability to process, vast quantities of data. This is facilitating the emergence of new, technology-driven competitors to banks which could potentially impact their dominant position in the financial system. A second is the impact of tighter regulation on banks. A third is expectations for banks' obligations to the community."

In this context, Mr. Kearns' talk is relevant to the public adoption of digital assets, like Libra and stablecoins. Other central banks, notably the Federal Reserve, the Bank of Canada, and the European Central Bank, have all mentioned continued studies and interests in understanding how digital currency and distributed ledger technology (DLT) can alter payments and banking processes. However, in his talk at the 32nd Australasian Finance and Banking Conference, his future concerns highlight the change technology firms, like Google, Apple and Facebook, have created through user data.

He said, "Technology firms for which collecting and analyzing data is in their DNA are a new type of competitor for banks that have historically struggled to take full advantage of the private data they hold. How well individual banks respond to technology challenges will no doubt influence their relative success."

Mr. Kearns mentions that recent payment technology changes pose a potential challenge to the role of banks. "To date, this erosion has been most apparent in emerging market economies where payments systems were not meeting customers' needs. For example, in China and several African countries, online marketplaces or mobile phone companies have come to dominate payments (largely bypassing the banks).

However, in Australia, and other developed economies, existing electronic payment systems (including new real-time payment systems such as Australia's New Payments Platform (NPP)) are already meeting customers' needs. Still, new payments providers engaging with banks and card companies could reduce the banking systems' revenue from the payments system.", he said. He continues to say that in economies where banks have provided poor services, as in cross-border transfers, new competitors, like stablecoins, can potentially capture market share.