The greatest unresolved issue in digital finance is the official response to the rise of cryptocurrencies, and the lack of a global consensus is not making the situation any clearer.
In Japan, regulators have licensed some government-approved cryptocurrency trading platforms and Sweden's central bank the Riksbank is actively considering issuing its digital currency and has commissioned a report on the viability of an e-krona.
It is no solution, as yet, for global international payments of any size. Corporate treasuries have also not embraced it wholeheartedly.
Australian online bookmaker Neds, for example, is seeking to make an AUD 60 million cryptocoin offering as part of its sports betting business, a move which has attracted close attention from local regulators.
The reality is that cryptocurrencies are a challenge to the sovereign jurisdiction of central banks and, if they develop sufficient momentum, could present a significant existential threat.
The choice for central banks is either to join and even embrace, the cryptocurrency movement in the hope of regulating and controlling it. It could also extend to the issuance of officially sanctioned cryptocurrencies, as is being considered in Sweden.
“When a country doesn’t have a credible currency, then people might look for other ones,” said Tony Richards, head of payments policy, RBA in a recent speech.
"Whether those are cryptocurrencies or something like the U.S. dollar is another issue, but we in Australia have a perfectly credible currency called the Australian dollar."
As Richards said, in some circumstances, some countries have abandoned their currencies due to economic chaos and monetary uncertainty. Zimbabwe, which experienced rampant inflation for much of this century, has "dollarized" and uses the U.S. dollar, as – ironically – does Cuba.
In these situations, some of the functions served by the U.S. dollar could potentially be helped by a cryptocurrency, but not all because cash is still widely used and essential for daily commerce.
Richards also made the point that with the decline of cash in most major economies, the established central bank-issued currencies are already highly digitized.
In Australia, for example, cash accounts for a declining 37 percent of all transactions, down from 70 percent in 2007.
Most money, said Richards, is already in “digital” or electronic form and we should look at bank deposits as “commercial bank digital money.”
The RBA has considered issuing an eAUD to give households and businesses an electronic payment instrument, but the current thinking is that there is not enough demand.
“However, some stakeholders in the payments area – including some fintechs – have expressed the view that the introduction of another form of central bank balance could be quite transformative,” said Richards.
“They have suggested the issuance of a new form of digital money that would be accessible to businesses and could be passed around on a distributed ledger. They argue that the availability of another form of central bank settlement instrument could reduce risk and increase efficiency in business transactions, for example, it could allow the simultaneous exchange of money and other assets on blockchains,” Richards added.
The closest thing to an official global view is from this year’s Global Financial Stability Report published by the International Monetary Fund, which is that cryptocurrencies fail to fulfill several of the critical functions of money.
"While they may serve as a store of value, their use as a medium of exchange has been limited, and their elevated volatility has prevented them from becoming a reliable unit of account," the report said.
None of this is stopping people from looking at cryptocurrencies as investible and tradeable assets, as seen by the proliferation of bitcoin miners and the volatility in values. But in this way, they are more like tradeable securities than currency.
The cryptocurrency movement has its challenges for growth, notably around scale and also the massive amount of energy required for bitcoin mining.
Bitcoin’s current estimated annual energy consumption equates to more than 30 percent of Australia’s total power consumption.
Despite its current opposition, Australia’s RBA said it is keeping an “open mind” on issuing an eAUD, even though “it does not appear that a strong case has emerged.”
Richards, who conceded he had owned a "small amount" of bitcoins since 2014, also agreed that the crypto currency’s blockchain design is well conceived.
“Even if one is quite skeptical of whether bitcoin will have a significant role in the economy in the future, I think it is hard to avoid some admiration for its design,” he said.