Australia digs into electronic dollar [Pros & Cons]
We are used to thinking of money in terms of notes and coins, which most of us keep in our wallets. However, the vast majority of money – 96.3% in Australia – is digital, held by banks and other financial institutions and moved through the process of bank transfers, debit cards and credit cards. But now, Australia is considering using another source of funding, this is the electronic dollar. This article will cover what it is, how it will be used, and the pros and cons of using this new financial asset.
A new financial asset to use
Australia is considering a central bank-issued virtual currency, as well as regulation of the crypto market, as it seeks to transform the way businesses and consumers in the country buy goods and services. A CBDC or Central Bank Digital Currency would be an “e-dollar,” valued at $1 but capable of being held digitally rather than in a bank like on computers, digital wallets, or phones, for example. This could help facilitate rapid consumer-to-consumer and consumer-to-business financing without the involvement of financial institutions or intermediaries. Additionally, it could also benefit people who don’t want to use banks to keep their funds in a safer form than cash.
A shift towards digital finance
Recognizing that the majority of money is already digital or online is a good place to start. Only a quarter of Australia’s “broad money” is in the form of actual physical currency, and the rest is in the form of deposits, which can generally be acquired and accessed digitally. As a result, the overwhelming majority of what we now call money is a liability of the private sector rather than the central bank, and it is already digital. Since most cash is now accessible online, there has been a significant shift towards electronic payment methods.
This trend of contactless transactions and the move away from banknotes will almost certainly continue, as the growing use of mobile digital payments and other innovations will contribute to this. However, banknotes will certainly continue to play an important role in Australian payments landscape for many years to come. Not to mention that banknotes are expected to remain the preferred means of payment for many people and for certain types of transactions. However, if you are looking for a crypto platform that will help you get used to the move to digital finance, using a platform like Immediate Edge is the best bet.
An e-dollar similar to bitcoin
The most commonly discussed alternative as a mainstream cryptocurrency would use blockchain technologies similar to those used in Bitcoin and other crypto-assets to record and monitor ownership and validate transactions.
With blockchain, each transaction is permanently recorded and difficult to undo. Transactions could be monitored by the central bank (in Australia’s case, the Reserve Bank). It is functionally equivalent to a central bank account which can be used to transfer funds to other accounts.
In most concepts, the account would pay no interest and the central bank would have the ability to limit transactions. When put into perspective, it’s like giving pocket money to your kids, but programming it in such a way that it can’t be spent on treats.
Take the idea like bus and train maps
One model would have been to create a digital token almost identical to cash. It could be transferred anonymously from one person to another, much like a banknote, without any centralized government involved.
Additionally, there is no documentation of who used the bus or train pass in some parts of Australia, unless the owner chooses to record responsibility and ownership.
A downside is that, unlike cash, a significant amount of funds could be stored on very small devices that could be stolen, lost, or corrupted. According to a New Zealand study, cash is very bulky, making it less likely that users bring huge amounts with them or store large amounts at home.
A privacy blockade
In the other area, central banks and corporations move forward with digital currency projects: wholesale funds. The Reserve Bank of Australia is well supported by the Atom project, which would allow financial companies to move funds between them more quickly.
Much of the community is slowly moving at the retail level. According to the Reserve Bank of Australia, in addition to the advanced economies of Sweden and Canada, the majority of economic systems advancing the idea are growing, including Cambodia, the Bahamas, Ecuador, the Eastern Caribbean, l Ukraine and Nigeria. They have a relatively weak electronic banking infrastructure in Australia and a population that cannot use it.
Australian banks are likely to be at the center of the shift to electronic payments
In Australia, the banking system introduced the infrastructure that enabled the transition to contactless transactions or electronic payments. However, the financial system in some other parts of the world has not. Non-bank entities, for example, have been at the forefront of the recent rapid expansion of electronic payments in China and Kenya. The lesson here is that if financial companies don’t react to their customers’ needs, others will.
At this point, it appears that the banking system would continue to provide the infrastructure through which Australians make electronic payments. However, the prosecution switch to contactless transactions through the banking system is not guaranteed. It is necessary that the cost of using the nuclear power plant is low for consumers and businesses and that the capabilities and function expand over time. If this does not happen, past experience tends to suggest that alternative systems or technologies may emerge.
There’s a lot going on in the world of finance, and a lot of it is driven by the development of technology. These advances create potential possibilities that were previously unthinkable. These developments translate into a much greater use of digital transactions and the development of new electronic payment methods. Although real banknotes will continue to be a crucial part of the world of payments for many years to come, this process still has a long way to go. However, even if it were technologically possible, the case for including a digital form of Australian banknotes in the payments circulation has not been made.