The RBA’s Head of Payments Policy isn’t really a Bitcoin guy, but he does own some.

Tony Richards is retiring at the end of the year but ahead of his departure, he weighed in today on cryptocurrency in an address to Australia’s Corporate Treasury Association.

In terms of crypto’s place in the future of finance, Richards is sceptical.

He said a range of factors could come into play in the years ahead where “much of the price increases of recent years could be unwound”.

We’ll touch on that shortly, but before consulting his crystal ball Richards also provided some good insights on recent history (and his own involvement in the space).


‘It is unclear how widely held they are’

Richards says he finds statistics that suggest 20 per cent of Australians hold some form of crypto “somewhat implausible”.

“I cannot help thinking that the online surveys they are based on might be unrepresentative of the population,” he said.

His justification was along the lines of even the RBA’s own surveys, some of which require 1000 respondents to record every payment they make for a week (who are these people?), do not capture “important segments” of the population well.

So in regard to crypto holding “some of the estimates out there are extremely surprising and may be symptomatic of the significant amount of hype and misinformation in this area.”


Richards is a hodler… and has been since 2014

This is the money shot. Richards really should have left it to the final section for an empty room.

Because as soon as he admitted he’s “had a cryptocurrency wallet since June 2014”, the calculators came out, and nothing else mattered.

Richards said he made his initial purchase of “a small amount of Bitcoin” (lol, so there were more to follow?)

And his goal at the time was “to try to understand new payment instruments and technologies”. Because that’s his job.

He’s used it since then for a “few small transfers” and “even a purchase at a café” (possibly an expensive coffee, factoring in hindsight and opportunity cost).

He then diversified into some Ether in August 2018 (because work, right?) but stresses the amounts are “still pretty small”.

The big question – did the RBA’s head of payments jump in at the Ether Top V1.0 ($US1300 in January)? Or the collapse in December (around $US100)?

It’s currently sitting just above the $US4300 mark, so there are potentially some 40x gains there.

As for BTC, it was trading at around US$600 in June 2014 — part of the first crypto bull market facilitated by a ramp-up in trading activity on the infamous Mt Gox exchange (before it crashed).

It’s now $US60,000. So however “small” Richards’ investment was, it’s riding some massive 100x gainz right now.


Crypto future

Even if he did pick up one BTC for US$600 and turned it into US$60k (or two BTC into US$120k…you get the picture), Richards didn’t paint a particularly rosy picture for the widespread adoption of cryptocurrencies in the future.

He said distributed ledger (blockchain) technology has potential use-cases and the capacity to enhance efficiencies in legacy systems.

In turn, it could also provide the platform for decentralised finance (DeFi) networks.

“Though neither smart contracts, nor DeFi more broadly, necessarily require the use of any particular cryptocurrency or token,” Richards said.

He added that in reality, despite the best-laid plans of DeFi advocates, consumer behaviour around financial transactions is more likely to lean towards two outcomes; paying for goods/services with assets that are stable in value, and conducting those transactions via a settlement system “that is clear and final”.

In effect, crypto falls short in those two scenarios.

For scenario one, it’s too volatile. And for scenario two, “transaction verification in existing cryptocurrencies, with their public blockchains and proof-of-work consensus, is probabilistic” (not clear and final), Richards said.

In that context, he said it’s plausible that “the current speculative demand could begin to reverse”, as households become less influenced by ‘FOMO’ and more influenced by regulatory risk.

A global policy framework to regulate crypto, plus the arrival of stablecoins and central bank digital currencies, could see crypto revert to “niche use cases, at best”, Richards said.

“If so — and also reflecting that the relevant code is often open-source, publicly available and easily copied — it seems plausible that current valuations of many cryptocurrencies would not be sustained,” he said.