Bitcoin ‘slow, unreliable, can’t scale’, says Australia’s Reserve Bank

Bitcoin isn’t winning friends amongst Australian bankers…

Tony Richards, the head of payments policy for the Reserve Bank of Australia, has bashed Bitcoin in a speech to financial analysts in the country.

Speaking on 26 June in Sydney, Richards told the Australian Business Economists Briefing that Bitcoin’s major issues are still speed and scalability.

“[T]he number of confirmed bitcoin transactions briefly got to over 400,000 per day in December when the speculative frenzy was greatest,” said Richards.

“That corresponds to a peak of about 4.5 transactions per second (TPS). But, to put that in context, Visa Net has a theoretical maximum of over 65,000 TPS.

“However, the peak in submitted Bitcoin transactions around this time was higher, closer to around 500,000 per day. As a result, the number of unconfirmed transactions was building up. At some points in December, there were over 100,000 transactions in the queue waiting for confirmation.”

While admitting that bank payments may be slow, with high transaction fees, Richards said that Bitcoin and other cryptocurrencies are not the solution central banks are looking for.

Hyun Song Shin, head of the Swiss ‘bank of banks’ BIS echoed these comments in a report last week telling investors that cryptocurrencies could not be used for payments due to the vast energy consumption required to mine them and maintain their blockchain.

Going down

While Bitcoin is more prominent in the news, “the number of businesses accepting Bitcoin may actually be falling,” said Richards.

“For example, some significant US online merchants announced a few years ago that they were accepting bitcoin, but some of these (for example, Dell) have since stopped doing so.

And while credit and debit card authorisations are almost immediate, bitcoin users are advised to wait up to an hour before relying on their transactions, said Richards.

“[N]ine years after its launch and about five years since it entered the public consciousness, Bitcoin continues to have structural flaws that make it unsuitable for many uses, many of which stem from its inefficient verification process.”

 Fascinating, not useful

Comparing Bitcoin to fiat currency, Richards said cryptocurrencies have “no intrinsic value” and any trading price – hovering around $6,000 as of June 2018 – is based only on a deflationary promise that the ultimate supply is limited.

Summing up, Richards added that while cryptocurrencies and distributed ledgers were “fascinating developments”, Bitcoin and other cryptocurrencies “are yet to establish themselves as reliable stores of value”.

Richards’ speech provides a window into how the country could further limit or expand the use of cryptocurrencies.

Australia is a relative early adopter in terms of governmental cryptocurrency regulation.

In April 2018, the country’s financial intelligence agency AUSTRAC enacted new laws around how cryptocurrency exchanges and providers could operate.

Any cryptoexchange with operations in Australia must now register with and report to AUSTRAC to meet the government’s anti money laundering and counter-terrorism financing obligations.

In May 2018, reported how the Australian authorities followed Romania, Denmark and Spain in a move to ban all cash payments over $10,000, with the law scheduled to come into force on 1 July 2019.

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