The governor of the Reserve Bank of Australia, the Australian Central Bank, Philip Lowe, believes that privately issued and regulated cryptocurrencies will improve the crypto ecosystem better than the Central Bank Digital Currency (CBDC). However, this will only work effectively if the risks are reduced through regulatory efforts.
The Reserve Bank chief made this comment during the recently held G20 financial meeting in Indonesia. This meeting was covered by Reuters, and according to reports, a key topic of discussion at this meeting was cryptocurrencies, decentralized finance (DeFi), their usage, and their impact on the economy.
The discussion was not limited to Australian officials. The Hong Kong Monetary Authority (HKMA) chief, Eddie Yue, shares similar thoughts with Lowe on the aspect of regulation. They believe that by scrutinizing cryptocurrencies, they could clamp down on the risks associated with DeFi.
This meeting comes after the Terra ecosystem crash, which caused a domino effect that negatively affected some crypto firms such as Voyager Digital. Lowe believes stricter regulations will reduce the risks and issues associated with cryptocurrencies.
In the meeting, Lowe disclosed,
“If these tokens are widely used by the community, they should be backed by the state or regulated, just like we regulate bank deposits.”
Lowe believes that the government should focus on regulation and leave innovation to private organizations.
He went on to add, “I tend to think that the private solution is going to be better-if we can get the regulatory arrangements right-because the private sector is better than the central bank at innovating and designing features for these tokens, and there are also likely to be very significant costs for the central bank setting up a digital token system.”
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