Regulated Private Cryptocurrencies likely to beat Central Bank Digital Currencies, states Australia’s Central Bank Governor

Rowe said:

“If we can make the right regulatory arrangements, we tend to think that private solutions are better.”

This is because the private sector is “better than central banks” in the innovation and design of cryptocurrency functions, Lowe explained. He added that creating a Central Bank Digital Currency and setting up a digital token system can be very expensive for a central bank.

In the same panel as Rowe, Hong Kong Monetary Authority (HKMA) CEO Eddie Yue said that tighter scrutiny and regulation of such private tokens could also reduce the risk from decentralized finance (DeFi) protocols.

According to the Atlantic Council CBDC tracker, Currently, 97 countries, including Australia and Hong Kong, are actively investigating whether they should launched their own CBDCs. While some countries are experimenting with retail CBDCs for direct consumer use, some countries are taking a more cautious approach with wholesale CBDCs for financial institutions.

The competition to issue a Central Bank Digital Currency has been fueled by the growing popularity of stablecoins such as tethers (USDT) and USD coins (USDC). The collapse of Terra’s stablecoin,TerraUSD (USTC), in May highlights the risks posed by stablecoins. This has created the urgency to deploy a state-backed token that will regulate and provide security.

Rowe said:

“If these tokens are widely used in the community, they need to be state-sponsored or regulated in the same way that bank deposits are regulated.”

Credit: Bank Indonesia (via YouTube)

Hong Kong Monetary Authority (HKMA) CEO Eddie Yue also commented on the future of DeFi: