Venezuela just proposed the “petro” cryptocurrency, and before that came Russia’s plans for the so-called “cryptoruble.” Now, it appears Australia could be next in line to create a national cryptocurrency, as plans have been introduced. Are the challenges too great at present, though?
Australia Seemingly Had Mixed Feelings Before
Like many countries, Australia hasn’t always been big on cryptocurrencies. The government’s issued warnings to users on several occasions illustrating the potential scams and pitfalls existing within the crypto ecosystem.
But it wasn’t long ago that the nation’s parliament ended the infamous “double tax” that was plaguing so many users hitherto, replacing it with less stringent regulations designed to make digital currency a little more accessible.
Despite the regulations and warnings, the Australian government has been willing to educate itself on bitcoin and blockchain technology. To date it has held one (fairly friendly) Senate inquiry, and hosted an industry information and network evening at its national parliament house.
So what now?
Change Is in the Air… Maybe
Philip Lowe — the head of Australia’s Reserve Bank — stated this week that plans for the creation of a national digital currency in Australia (a crypto-version of the nation’s dollar) have been formally introduced.
Even still, government officials have two major concerns that could throw a wrench into the process:
- it is unclear if or how the cryptocurrency could harm national banks;
- the Australian dollar is very highly tradeable, ranking fifth among the world’s currencies in 2016.
In other words, Australia is enjoying a stable political and economic system, and the dollar is proving very popular among foreign exchange markets. Issuing digital currency this early in the game could potentially lead to a run on Australian banks.
In layman’s terms, everyone rushes in at once to retrieve their money and the banks don’t possess the resources to pay them, thus wrecking Australia’s economy.
A Few Too Many Risks?
Lowe explained his explicit concerns in recent remarks to the press:
“If we were to issue electronic banknotes, it is possible that in times of banking system stress, people might seek to exchange their deposits in commercial banks for these [electronic] banknotes.
In other words, it might be easier to run on the banking system. This could have adverse implications for financial stability … If financial institutions do not respond to customers’ needs, others will.”
Additionally, Australian banks currently possess budgets collectively valued at $400 billion USD along with federal insurance issued by the government. That would be enough to handle a mild “bank run,” but panic spreads fast and irrationally through markets.
Australia’s leadership is surely going to want better guarantees regarding stability.
Not Saying ‘No’ to National Cryptocurrency Just Yet
That’s not to say, however, that a digital currency isn’t on the table for the future.
Countries like Russia have long sworn off bitcoin and related cryptocurrencies, only to retract these views and venture (if slowly and cautiously) into the digital coliseum. As fiat grows less and less stable throughout the globe, virtual coins may be the answer — for Australia and many others.
Furthermore, Australia boasts a strong cryptocurrency community that could potentially push the necessity and overall presence of crypto in the nation in the coming years.
For instance, Australian blockchain consulting firm DigitalX shot up by nearly 30 percent following an announcement that it would “reprise its role as a cryptocurrency market maker.” The company has over $18 million in liquid assets, with nearly $3 million of them in bitcoin and ether.
“DigitalX has a strong track record dating back to 2014 as one of the leading liquidity providers in the Bitcoin marketplace,” says chief executive Leigh Travers. “We wound down our trading desk last year due to a lack of funding. However, our strong financial position, with appreciation in the value of Bitcoin, has allowed us to reignite this service.”
Will Australia give in to the growing demand for crypto? What do you think? Post your comments below.
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