Momentum on central bank digital currencies (CBDCs) is building but everyday Australians are unlikely to see a "kanga coin" just yet.
"Enough countries will go down that route and we'll end up there," Reserve Bank of Australia assistant governor of financial systems Michele Bullock said on Wednesday.
Work by central banks on cryptocurrencies is "hotting up", she told the Global Association of Women in Payments forum.
But there would need to be rules around privacy and a capacity to track where people are sending their money.
While bank notes afford anonymity, and no one needs to know what is being transacted, Ms Bullock said this was "extremely unlikely" to be the case for CBDCs.
Despite the rise in popularity of cryptocurrencies, if CBDCs became widespread then unregulated cryptocurrencies were likely to remain "niche" and not become a replacement for cash, Ms Bullock said.
But she questioned whether a "highly banked" Australia needed an alternative to its fast and highly secure payments system in the near term.
"Most of our money is digital," she said.
In other parts of the world where many people don't have bank accounts, CBDCs are already being used to further financial equality and better track money laundering and cyber criminals.
Unlike anonymous cryptocurrencies, CBDCs are official, such as the Sand Dollar issued by the Central Bank of The Bahamas in October 2020.
In Australia, an official digital currency or token would be "of most importance in the wholesale space", for settlement of large amounts between banks and central banks, Ms Bullock said.
National Australia Bank head of digital innovation and sustainability Lisa Wade told the conference that banks, not central banks, would need to take the lead on digital currency to help everyday users enter "Web 3.0".
She said a hybrid payments system could start with the use of an official digital currency to buy houses and cars.
The RBA has been looking at settlement of big amounts of money changing hands between financial institutions, and experimenting with a "token", most recently with Commonwealth Bank and NAB.
The banks are also working with blockchain firm ConsenSys Software to trial the RBA's idea of a wholesale CBDC.
Ms Wade warned banks must not repeat the mistakes of the past, and should instead reduce the carbon footprint of payment systems and make them accessible to more people with a sustainable digital currency.
"Let's build this technology for good, to do good."
Ms Bullock agreed moving high volumes of cash was carbon-intensive, but added cryptocurrencies were heavy users of electricity generated by fossil fuels.
Australian Associated Press
