Ever since cryptocurrencies started getting international traction, more and more countries began to consider its technological and innovational potential. Some even started to wonder what benefits they could bring to more regulated systems. The talk of creating a central bank cryptocurrency has been actively going on in many countries. The idea itself might seem contradictory, seeing that the main appeal of cryptocurrencies comes down to the fact that it is decentralized, anonymous, and untraceable. But banks and governments seem set on making cryptocurrency work for their existing services and policies.
Let’s look at China, which has been working on its central bank cryptocurrency for almost a year now. It will be launching the project soon, with the help of telecommunication giant Huawei and firm backing from the government. While China is dedicated to making cryptocurrency as mainstream as possible, Australia has a different approach. It is unlikely that cryptocurrencies will be taking over from regulated systems, or banks as we know them. Not in Oz.
Lack of demand for CBDC
While conversations around this topic have been quite popular in Australia, the final decision rests with the country’s Reserve Bank. They already said that they see no need for a central bank cryptocurrency now since no one seems to be asking for it. But it actually makes a lot of sense for a country where regular cryptocurrencies are already quite popular. The main selling point of a central bank crypto is that it is potentially more reliable and trustworthy. Many people who use Bitcoin, or other popular cryptocurrencies, rely on technology because they do not want to deal with regulations or transactional costs. In fact, anything that most people usually find annoying about traditional banks or currencies!
In general terms, cryptocurrencies are huge in Australia, especially in the entertainment industries and gambling. The country has even updated its regulations to better accommodate cryptocurrencies and to promote their safe adoption. Over the last year or so, we have seen many new facilities pop up, accepting different crypto payments. Some operate exclusively on Bitcoin or Ethereum. We have seen the rise of Bitcoin casinos, or even Bitcoin games, offered at Australian real money online casinos. This is not as common in other parts of the world, but Australia seems to love cryptocurrency. And that is why the adoption rate has been so impressive across the nation.
The talks about introducing central bank cryptocurrencies might need a little more time. At least to gather support from the ordinary people. As mentioned in the official statement, released by the Reserve Bank, there is no need for this sort of cryptocurrency because most people already enjoy the perks of digital payments through traditional banking services. They are already offering more technologically advanced services that allow their customers to transfer money easily, without having to pay excessive fees or having to wait long periods of time. People already have access to the main benefits that cryptocurrencies offer. Provided, of course, that they are not so worried about the anonymity of these financial transactions.
It might be that the conversation about involving banks in issuing a cryptocurrency might be a little too ahead of its time. It will simply take a lot longer for big groups of people to consider cryptocurrencies as something trustworthy. Even if the security levels provided by the current technology are higher than ever. This big transition cannot happen overnight, and we should not expect every country to suddenly fully switch to cryptocurrencies. Even though Australia is technically one of the most crypto-friendly countries in the world, this does not mean that people want to have central bank cryptocurrencies. Unlike China, where introducing a regulated cryptocurrency was mostly a government-initiated idea, Australia wanted to wait for the public response first. And since the response was rather underwhelming, the authorities saw that there is clearly the need for such a product in Australia. Because of that, the country has decided to slow down the process and avoid spending time on something that has (potentially) no place on the Australian market.
Current banking system
A big contributing factor to this decision was the state of the current banking system. It is thought to be stable enough that people are not explicitly looking for alternative solutions. For example, in some countries in Africa or Southeast Asia, the need for cryptocurrencies came from the lack of traditional financial services. But when it comes to Australia, there is no shortage of banking services. They are readily available for the majority of the population, so people do not really have the need to turn to cryptocurrencies. Even if they want to conduct easy, frictionless payment, they can use the existing mobile banking services.
Another issue that the Reserve Bank brought up is if the digital currency would (theoretically) take over, then the bank would then have to deal with a decrease in deposits. This, in turn, would lead to an overall decrease in the amount of funds left for giving out loans. This could endanger the existing financial system, causing new challenges across the country. But just because Australia is not ready for Central Bank Digital Currency (CBDC) right now, it does not mean that the moment will never come. Other banks and financial institutions recognize the real value in CBDC, and they want to stay relevant and up to date with new technologies. Most of the banks understand the importance of cryptocurrencies for today’s customers and see that this is not just a fleeting trend. The future of finance really is digital. European Central Bank (ECB) is already considering the launch of its own stablecoin, with Russia and South Korea waiting closely in line to follow their next steps.
Australia, as one of the most crypto-friendly places in the world, is likely to come to the same conclusion soon. But for right now, we are seeing that the need for these services is not high enough to justify the introduction of such a revolutionary or disruptive product. It will require a lot of effort, time, and resources. The situation might change in a matter of months but for now, the Reserve Bank seems dead set on their decision.
Future of CBDC in Australia
This move does not affect the current state of cryptocurrency. The technology is already well-established enough in the country and has a large group of loyal users. But it could affect Australia’s status as a trailblazer and innovator in the industry. Australia had an opportunity to become one of the first countries to launch a product of this kind and push for technological advancement, taking the lead in the process. But right now, it seems that cryptocurrency is not Australia’s priority, preferring to focus somewhere else.