Realizing the potential of digital currencies to revolutionize the payment and settlement system, financial authorities seem to be increasingly taking interest in creating their own digital currency. People’s Bank of China Governor Zhou Xiaochuan recently suggested that the central bank is not only interested in digital currencies but is also researching related technologies.

Latest reports suggest that the Reserve Bank of Australia might be the next in line. The Sydney Morning Herald reported that the central bank has said that it is likely that Australian dollars will come in digital form in the future.

Speaking at the Payments Innovation 2016 Conference, Tony Richards, head of the RBA's payments policy department, said that although the bank is not actively considering introducing a digital currency in the country yet, a digital version of the Australian dollar is possible in the future.

"A plausible model would be that issuance would be by the central bank, with distribution and transaction verification by authorised entities, which might or might not include existing financial institutions," Mr Richards said. "The digital currency would presumably circulate in parallel, and at par, with banknotes and other existing forms of the national currency."

He also said that the central bank believes that privately-established virtual currencies such as bitcoin are unlikely to displace well-established, low-inflation national currencies in terms of usage within individual economies. Also, given the risks around cybersecurity and cryptography, Richard believes full-scale issuance of digital currency in any country "is still some time away."

“Bitcoin has, however, served to stimulate interest in the potential offered by distributed ledgers, extending to the possibility of central-bank-issued digital currencies”, he added.

Further, touching on the topic of blockchain or distributed ledger technologies, Richard said that as the overseer of clearing and settlement facilities licensed to operate in Australia, the RBA has a keen interest in the plans of the ASX Group to explore the use of distributed ledgers. He added that the bank will be working closely with ASX, along with the Australian Securities and Investments Commission and other relevant public sector organizations, as it determines whether a distributed ledger solution might be the best way to replace its existing CHESS infrastructure.