According to a Reserve Bank of Australia official, big gains in the cryptocurrency market could be wiped out by changing trends, as well as legal and monetary changes.

Lower trendy influence, increased concern about the industry's energy usage, and link with financial crimes are all factors that could put pressure on digital assets, according to Tony Richards, the RBA's head of payments policy.

In a speech on Thursday, he also suggested that new stablecoins, or digital assets that aim to anchor their value to something like the US dollar, as well as central bank digital currencies, might fill gaps in the market that currently confine cryptos to "narrow use cases."

“There are plausible scenarios where a range of factors could come together to significantly challenge the current fervor for cryptocurrencies,” Richards said. “The current speculative demand could begin to reverse, and much of the price increases of recent years could be unwound.”

As more investors get interested in the concept of digital assets, the market matures, and new areas such as decentralized finance (DeFi) and non-fungible tokens (NFTs) emerge, cryptocurrency prices have skyrocketed.

Nonetheless, the asset class is young and volatile, and many traditional finance professionals and regulators have raised alarm about its potential risks. Gary Gensler of the Securities and Exchange Commission and Axel Weber, head of UBS Group AG and former president of the Bundesbank, are among them.

Richards also stated that the RBA is still not convinced that a central bank digital currency is required in Australia, but that more research would be conducted on the matter.

“The bank acknowledges the argument being made internationally that with all the innovation that is occurring in the payments area, provision of a new digital form of central bank money for general purpose use could be important for safeguarding confidence in national monies and the role of fiat currencies.”