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Westpac
Group
sees
potential
in
central
bank
digital
currencies
(CBDCs),
partly
as
they
would
be
released
by
central
banks
and
act
as
a
form
of
electronic
cash.
The
bank
released
a report
on
Monday
to
create
awareness
of
the
digital
assets
space
following
interest
from
customers
and
clients.
Senior
economist
Jarek
Kowcza
said
in
the
Westpac
Wire
post
that
the
“boom
and
bust
cycle
in
crypto”
contains
“many
elements
of
a
financial
bubble
driven
by
investor
mania
and
irrationality”.
“But
there
are
some
key
areas
where
innovation
may
continue,”
Kowcza
said.
“One
that
stands
out
is
central
bank
digital
currencies
(CBDCs).
As
the
name
implies,
these
would
be
cryptocurrencies
issued
directly
by
central
banks.
“One
of
their
key
advantages
is
that
they
could
act
as
a
form
of
electronic
cash.”
He
said
CBDCs
could
tackle
private
cryptocurrency
issues.
“Crypto
transactions
are
inefficient,
have
high
costs,
slow
transaction
times,
and
are
not
widely
accepted,”
he
said.
Cryptocurrencies
also
“exhibit
extreme
price
volatility
and
regular
crashes,
making
them
a
poor
store
of
value”
while
CBDCs
or
fiat
currencies
“are
used
to
price
goods
and
services.”
Kowcza
pointed
to
the
Reserve
Bank
(RBA)
and
the
Digital
Finance
Cooperative
Research
Centre
(DFCRC)
pilot
project,
which
is
exploring
the
use
cases
of
a
CBDC.
The
year-long
research
eAUD project
commenced
this
January
and
received
over
140
submissions
for
possible
use
cases,
with
findings
set
to
be
released
mid-2023.
Kowcza
also
said,
“Australia
already
has
a
modern
and
efficient
payments
system”
through
the
New
Payments
Platform
(NPP),
“replicating
one
of
the
key
touted
potential
benefits
of
crypto”.
‘Revolutionary
possibilities’
“Some
of
the
more
revolutionary
possibilities
lie
in
using
CBDCs
as
a
foundation
on
which
to
build
a
more
efficient
and
interoperable
digital
domestic
and
global
financial
system,”
Kowcza
said.
He
said
the
digital
asset
could
create
a
stable
and
secure
foundation
from
which
“other
innovations
can
be
overlayed”,
leading
to
better
financial
products
and
services,
improved
costs
and
less
risk
“We
may
even
see
uses
no
one
has
even
thought
of
yet
appear.
“It’s
important
to
keep
a
cool
head
in
an
industry
prone
to
hype
and
promises,
most
of
which
have
yet
to
be
delivered,”
he
added.
In
an
accompanying
cryptocurrency
special
report
part
2
[pdf],
Westpac
stated
scalability
is
a
“significant
hurdle”
while
“volatility
is
extreme
and
environmental
impacts
remain
significant”.
The
report
said
while
stablecoins,
which
are
tied
to
a
commodity
or
asset,
were
in
introduced
to
“address
challenges
associated
with
the
extreme
volatility
of
digital
currencies”,
they
also
brought
with
them
some
challenges
“During
the
‘crypto
crash’
of
2022,
the
value
of
the
then
largest
algorithmic
stablecoin
collapsed
to
near
zero
in
the
space
of
a
few
days,”
the
report
states.
This
has
not
stopped
progress
in
the
space,
however.
ANZ
released
its
own
A$DC
stablecoin
last
year
and
NAB is
moving
forward
with
its
own
AUDN
coin.
In
July
last
year,
Westpac
launched
a
search
for
a
principal
architect
for
digital
assets
and
cryptocurrency,
indicating
its
own
intention
to
step
into
the
cryptocurrency
and
blockchain
space,
having earlier
kept
quiet on
its
ambitions.
Meanwhile,
CBA
believes
mass
market
adoption
of
a
CBDC
in
Australia
is
still
“some
years
away”,
given
technology
and
regulation
complexities.
However
it
does
remain
in
discussions
with
regulators
regarding
a cryptocurrency
trading
pilot.
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