Recent Developments on the Australian CBDC Project

If you haven’t heard, the Australian Central Bank has been in the process of developing a centralized digital currency for a while now, however, there have been several recent developments that have begun hitting the news this last week.

Whether or not you are Australian, the CBDC project may affect you. Keep reading to learn more about it, and what you can expect in the future.

What is the Australian CBDC?

The Australian CBDC is a digital currency created by the central banking system in Australia. In short, it is a digital form of the current Australian currency, AUD.

It is still in development, but is believed to become a new, more convenient way to pay…but mostly on the wholesale market. This means that it is unlikely for the average individual to plan to use the Australian CBDC—rather it will be used by banks, large retailers, and government institutions to settle and send large balances of AUD. This method of using CBDC would effectively replace the current method of settling these balances, known as exchange settlement accounts.

The CBDC would also eventually be used in government cross border payments, but the developers working on the project state that this phase is a long way off. The project of developing the Australian CBDC is known as Project Acacia. Currently, it is expected that the project development will run through 2027.

Will the Australian CBDC Eventually Be Used in Retail?

The further the development comes, the more it looks like that the Australian CBDC has little use beyond wholesale uses—meaning it is unlikely that it will ever be used by citizens.

We believe that, in general, this is a good thing. While CBDCs can make digital payments a bit easier, most bank cards already allow that without the built-in tracking a CBDC would implement on its user. Because CBDCs are built by governments, they are much more traceable than cash and can be used for citizen monitoring—even when the government claims they won’t use it this way.

Related: Why Should You Use Bitcoin When Playing Online?

What Are the Benefits of a CBDC?

Generally, a CBDC only benefits the government and governmental entities that use it. When they use a CBDC to complete a transaction, risk is reduced and transparency is increased, making it easier to broker deals between large entities.

Additionally, the costs of the transaction are lowered, though there will still be fees, but they are expected to be much lower than current wiring fees for cash or fees for sending digital bank balances.

In countries where banking infrastructure is lacking, CBDCs can help the country to make transactions at a higher level and offer better banking solutions for businesses and citizens. The countries who typically would benefit from a CBDC at this level, however, are rarely the ones that implement them. There are a few exceptions however, which we will dive into later.

At the consumer level, the benefits of a CBDC are few and far between. Mostly because the average individual isn’t wiring large amounts of money. While those who do buy homes in cash could potentially benefit, the privacy you give up when using a CBDC to complete a transaction is rarely worth the reduced fees.

Is Australia the Only Country Making a CBDC?

According to Reuters, there are currently 134 countries in the process of making a digital version of their currency. Some of these include China (who’s CBDC is well underway), the United States, and Russia.  

This list also includes a few countries which already have a CBDC, namely Jamaica, Nigeria, and the Bahamas. While we aren’t in favor of widespread CBDCs, these countries already had a weak currency, leading them to deal in other currencies (like the US dollar for the Bahamas) so in these cases, a CBDC can be seen as a good thing for the country as a whole.

Although governments see the benefits of creating a CBDC, we don’t feel the same way. We would rather something truly global and at least semi-anonymous be chosen (like Bitcoin) than give up complete privacy. Plus, once all countries have their own CBDCs, cross border payments may once again become costly due to currency exchange fees.

Related: CBDC The Government of China’s New Currency

How the Australian CBDC May Affect You

Maybe you are reading this as an American wondering why you should care about the Australian CBDC. Or maybe you are Indian, or French. No matter your country of origin, the development of a CBDC by a country as large and innovative as Australia does concern you.

Previously, only smaller countries have been successful in implementing a CBDC. But if Australia manages, and the benefits they promote turn out to be true, several other large countries could follow suit. While initially little will change on the retail level, we do worry that this is another, even closer step, toward a cashless world.

Honestly, cash is a pain, and we understand why most individuals have turned to using cards for their main method of payment. Plus, cash costs the government to produce and replace on a regular basis. The problem is, cash offers a bit of privacy that digital payments and CBDCs don’t offer.

Once you give up privacy in the form of giving up cash, it’s impossible to go back. Even if you have nothing to hide now, what’s to say a new law won’t be enacted tomorrow that will give you something to hide? This is why we hope that cash money remains a thing, even with this development.

Obviously, we assume some day the world will be cash free, inevitably. We just hope that Bitcoin and other crypto payment systems evolve at the same rate as CBDCs so that those who do not wish to give up privacy will have a secure payment option that isn’t a CBDC. But, based on past events, we aren’t holding our breath. For now, we will wait and watch the Australian CBDC and see what becomes of it between now and 2027.

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