Emerging bitcoin use not without risks, says RBA

Glenn Stevens has become the latest central bank governor to acknowledge the rise of bitcoin and the potential for speculative problems with the virtual currency.

Glenn Stevens has become the latest central bank governor to acknowledge the rise of bitcoin and the potential for speculative problems with the virtual currency.

In an interview with Fairfax Media's The Australian Financial Review, the Reserve Bank of Australia governor said the digital currency, which runs without the backing of a central authority or bank to manage transactions, was in a "very interesting space", but was not without its risks.

Since being launched four years ago, bitcoin has become hugely popular on exchanges in China.

Last week, China's central bank moved to bar its commercial banks from accepting bitcoin, causing the currency to lose 40 per cent of its value. The bank cited concerns about money laundering given a lack of regulatory supervision over bitcoin trading.

But the virtual currency is gaining broader appeal in Australia. There is one bitcoin exchange in operation and many smaller software providers are emerging. At this stage, the RBA does not see this as an issue.

"Maybe there will be a world in which currencies are based on some computer algorithm to limit supply as opposed to physical gold or something," Mr Stevens said.

"There have been many such currencies through the ages ... the ones that survive will be the ones that hold their value, which is why we have an inflation target, which we're hitting."