A Crypto Version of the Australian Dollar is in the Works

Blockchain-based cryptocurrencies have many uses when it comes to helping develop smart cities. From Norway’s private smart city Liberstad to China’s ongoing adoption of a digital version of the yuan, the word’s banks are slowly but surely coming to the realisation that cryptocurrencies are key to the interoperability of essential infrastructure. Today, the latest financial institutions to adopt cryptocurrency are Australia’s banks, which are working on developing a crypto version of the Australian Dollar (AUD).

More specifically, the Reserve Bank of Australia (RBA), the National Australia Bank, and the Commonwealth Bank of Australia are leading the way in the development of a blockchain-based central bank digital currency (CBDC) version of the AUD. “With this project, we are aiming to explore the implications of a CBDC for efficiency, risk management, and innovation in wholesale financial market transactions,” details financial system assistant governor for RBA Michele Bullock. “While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system.” In short, while the digital crypto version of the AUD may be developed for everyday household transactions down the line, its initial development will be focused on large-scale financial market transactions.

The five aforementioned organisations will be developing a proof-of-concept for issuing a tokenised form of the CBDC, which is designed for the funding, settlement, and repayment of tokenised syndicated loans by wholesale market participants. A guide to the Australian banking system by FXCM identifies the aforementioned banks as three of the country’s main financial institutions, the decisions of which shape the way Australians handle their money. So while the current CBDC is aimed at large transactions, the developers are also open to exploring its further development for issuance to the larger public, similar to how the Bitcoin and Ethereum networks are accessible to and usable by anyone nowadays. In addition, this endeavour is in partnership with Perpetual, an investment advisory firm, and ConsenSys Software, a blockchain company that supplies the tech for the purported new CBDC. Currently, the goal of these organisations is to start the release and use of the CBDC as early as the end of 2020.

As promising as this development may be for Australia’s banking system, it is not without its risks. Apart from expediting and lowering the cost of large financial market transactions, Australia’s new CBDC is also aimed at greater financial safety for investors and users, a shared goal of those who are developing blockchain-based currencies around the world. However, as Asia Times’ report on China’s digital yuan reveals, even blockchain wallets are not immune to being counterfeited by black market participants. “We have spotted counterfeit digital yuan wallets in the market. Just like in the era of paper currencies, the central bank also has the task of fighting forgery [of the digital yuan],” explains the head of the Chinese central bank’s digital currency institute, Mu Changchun. Those who are developing the digital AUD will no doubt be faced with similar risks and challenges.

Despite this and other risks, Australia’s financial institutions seem dead-set on releasing their CBDC by the end of 2020. While it is promising that the country is embracing blockchain fintech, it remains to be seen whether or not this decision will help Australia to establish the financial interoperability of its most essential national infrastructures.

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Within this program, we can deliver to governments and cities the possibility of implementing Smart City projects from idea (vision) to the final stage of implementation.

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