Australia’s Reserve Bank Considering Ethereum-based Blockchain
Regulators have been interested in adopting cryptocurrencies since the day they went mainstream. 2019 was the year when cryptocurrencies stopped being a strange or elusive innovation, confined to traders and industry geeks. It was also when a large number of newcomers started to show their interest in using and investing in crypto. Even though there were a lot of scandals or controversies connected to cryptocurrencies last year, nobody is treating cryptocurrency as something that could disappear and fade into irrelevance any time soon. Everyone knows that cryptocurrencies are here to stay. Now, it is up to the regulators to make sure that digital transactions of this kind grow (while its users continue to stay safe). Although some policymakers might not fully realize it, there are entire industries that are either dependent or built around crypto.
Australia is one of the few countries that has managed to strike a perfect balance between keeping strict regulation at bay, while actively working to ensure a safe environment for everyone who is using cryptocurrencies. In the last two years, there have been a lot of crypto-fraud cases in Australia, prompting the legislators to revise its existing regulations. This pushed the authorities to create more options for secure transactions, particularly using blockchain technology. In fact, Australia is considering the launch of its own, Reserve Bank-regulated cryptocurrency. The final decision will depend on the public’s reaction and general demand for these kinds of services and products.
Need for regulations
Among the nonstop discussions about Bitcoin and other cryptocurrencies, talks of introducing a government-regulated version of crypto have suddenly got more popular. And not just with the politicians. While contradictory in its very nature, a lot of people recognize the need to regulate transactions. At least to some degree. This is purely to make sure that all safety measures are in place, limiting the space for (potential) fraudulent activity. Others see anonymity as one of the cornerstones of crypto, wishing to maintain its independence from financial institutions (of any kind). They firmly oppose any control or attempts at regulation. Most of the people who rely on cryptocurrencies for their transactions want to keep its key functionality: easy user access and shake their head against any changes in this direction.
Australia is one of the countries where cryptocurrencies have really taken off. It was not necessarily because of the government’s efforts, but because people responded to technology so well. As a result, now, countless services accept crypto payments. Some entertainment centers and most of the online casinos have special welcome bonuses and promotions for Bitcoin or Ethereum payments. Australians slowly started to accept the fact that cryptocurrencies are a big part of the nation’s financial landscape. In May of last year, Australia updated its regulations on cryptocurrencies to make transactions even safer. The new rules made crypto funds more reliable and introduced new measures against fraud, money laundering and potential ways of financing terrorist activities. For some people, the move signaled the next logical step: CBDC (Central Bank Digital Cryptocurrency). The talks about Australia’s Reserve Bank launching its own digital currency have been going on for almost a year now.
Why Australia is a perfect place for CBDC
Australia’s case is a bit different compared to other countries that are active in implementing this approach. Some are already working on advanced pilot projects and are on due course to launching their regulated cryptocurrencies. Australia’s central bank has been operating a blockchain lab for a little over two years now. It has been mostly active in testing an Ethereum-based blockchain. It is easy to assume that sooner or later, other banks would take action and get into cryptocurrencies as well. The blockchain lab serves as a service that allows the central bank and commercial banks to conduct transactions between each other. Put it this way, the growing rumors about the launch of a regulated cryptocurrency were actually not (entirely) baseless.
It became a real possibility when the Reserve Bank published a (certain) document, addressed to the Australian Senate. The PDF confirmed that there was a way of launching blockchain-based apps for household purposes. But, as most industry pundits would have predicted, there is no real need for such services in Australia. At least now. While many countries do not have any other options than cryptocurrencies or operate unregulated digital payments, Australia has a well-established banking system. Most of its users are actually quite fond of it. The main reason why cryptocurrencies work for large groups of people in some countries is because they are the best possible option. In Australia, there is no lack of traditional financial services and the need for improvement is not as strong. The vast majority of them offer digital payments via mobile platforms anyway.
Besides the demand for these services, the banks will need to factor in the effects of people “transitioning” to digital cryptocurrencies. Essentially, the banks will have to cut down on the number of loans they can give out (negatively), disrupting the existing system and making the lives of many people harder.
Future of CBDC in Australia
Australia has a chance to develop a healthy, innovative approach that marks the “middle ground” between allowing cryptocurrencies to function with no restrictions or banning them completely. The country could potentially create its own centralized stablecoins that would be extremely safe and reliable, being backed by gold. Australia is the best place to do that because it has robust, existing regulation in place and a low threshold of crime or fraudulent activities. Plus, many banks are already familiar with the concept, with operational know-how that is relevant for cryptocurrencies. What is certain, there are not many places where the central bank is managing blockchain operations!
While the demand for these services has not peaked in Australia (at least not yet), this can swiftly change. Everybody agrees on the importance of cryptocurrencies. While some regulatory bodies refuse to work with crypto, this has not been the Australian experience. The country has the potential, talent, and resources to become a leader in cryptocurrencies. Even if the entire society is not fully open to that idea quite yet, we can see that it might be a real possibility, some time down the line.
Australia has long given up on the idea of putting in restrictions on cryptocurrencies. It firmly believes that “adapting,” or even “embracing” will lead to better results. It has taken the approach of working together to create an environment where cryptocurrencies can function and develop. Launching a central bank-backed digital currency could be the next step forward. In short, Australia could easily become the most crypto-friendly country in the world. The country is dedicated to ensuring that all can enjoy the benefits of cryptocurrency. Of course, this is done by minimizing any damages or risks that might come with any (relatively) new technology. But the Reserve Bank has already got considerable experience. It is well-equipped to look out for flaws or adjusting the parameters to the Australian context. Once the demand goes up, Australia will be ready to deliver.