Digital Aussie Dollar Is Being Considered by A Senate Committee, But What Is It?

Digital Aussie Dollar Is Being Considered by A Senate Committee, But What Is It?
Image: iStock Photo

A Senate committee has been looking into the use of cryptocurrency in Australia, as part of its wider probe into what the country can gain from being a global leader in blockchain technology. The committee has been investigating the wider fintech scene for a few years, but today it has asked for the government to take a hard look at the viability of a Central Bank Digital Currency – an Aussie dollar, but crypto.

The Senate Select Committee on Australia as a Technology and Financial Centre in its latest report made 12 recommendations to government. They included amendments to the country’s anti-money laundering laws to allow for the use of cryptocurrency without it being considered illegal and opening up banking tech such as the New Payments Platform to fintechs.

But they have also asked for the government to consider if a digital Aussie dollar is feasible.

“The committee recommends that the Treasury lead a policy review of the viability of a retail Central Bank Digital Currency in Australia.”

What Is A Digital Aussie Dollar?

A central bank digital currency (CBDC) is essentially a digital version of existing legal tender. In our case, the Aussie dollar.

The CBDC would be a liability of, or a claim on, the central bank, in a digital form. It’s also known as a stablecoin, because it’s, well, stable.

This could include both retail CBDC, which would be like a digital version of cash that is essentially universally accessible, and wholesale CBDC, which would be accessible only to a more limited range of participants.

Like cash, the unit of account of the CBDC would be the sovereign currency, such as the Australian dollar.

So unlike cryptocurrencies like bitcoin, where its value fluctuates when converting it to AUD, an Australian CBDC would be 1:1 with the Aussie dollar. And a digital Aussie dollar would also be considered legal tender.

What Do The Regulators Say?

The Reserve Bank of Australia (RBA) has been exploring options for a wholesale CBDC.

In 2019, it developed a proof-of-concept of a distributed ledger-based interbank payment system using a tokenised form of CBDC, backed by exchange settlement account balances held at the RBA. It’s also been working with Treasury, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission on this.

But, in July, the RBA basically said it didn’t see a need for a digital Aussie dollar.

“To date, there has been essentially no issuance of Australian dollar stablecoins nor use of them as a payment method in Australia,” the RBA said in a submission to the committee.

“Nevertheless … the working group [continues to] study the benefits and possible risks associated with stablecoins and to identify any possible regulatory gaps.”

If a digital Aussie dollar were to emerge, however, the RBA said it needs to be safe and be wrapped in strong consumer protections and regulations.

But the committee wants the work to continue, basically to ensure that Australia maximises any potential opportunities in this area, just this time by Treasury.

What Else Have They Recommended?

This committee has been running for years; they’ve also published two chunky reports before this one, received 88 submissions to its third round of investigation and held countless hearings. They’re doing a little more than just considering a digital Aussie dollar.

So at a very base level, where blockchain and digital currency is concerned, in addition to a digital Aussie dollar, they have also asked for a dedicated market licensing regime for Digital Currency Exchanges (Austrac already monitors all exchanges that operate in Australia, but like what the U.S. is reportedly looking into, the Aussie version would impose actual regulation, not just monitoring of crypto) and that the government get its whiteboard out and map the various types of digital asset tokens in Australia.

Oh, if you’re mining crypto, the committee wants you to get a tax discount if you do it by sourcing your own renewable energy.

This doesn’t mean we’re getting a digital Aussie dollar, however, just that the committee has politely asked the government to have a look.