Australia to consider creating its own cryptocurrency

As digital dollars like Bitcoin become more popular, Australia could soon be home to be a unique government-backed cryptocurrency.

Australia will consider creating its own cryptocurrency as part of sweeping changes to modernise the nation’s outdated payment systems.

Josh Frydenberg will unveil the reform plan on Wednesday, with advice to be provided next year on whether Australians should be able to shop and save with government-backed digital dollars.

The Treasurer will also promise a licencing framework for existing cryptocurrency traders to provide protections for consumers and certainty for businesses dealing in the risky virtual market, along with new rules to ensure the right amount of tax is being paid.

More than 819,000 Australians have bought and sold digital currencies in the past three years, according to the Australian Taxation Office, with a 63 per cent surge from 2020 to 2021.

In a major speech, Mr Frydenberg will say the government’s plan represents the most significant change to Australia’s payments system in 25 years.

“Given the pace of change and those leading it, if we do not reform the current framework it will be Silicon Valley that determines the future of our payments system,” he will say.

“Australia must retain its sovereignty over our payment system.”

Federal Treasurer Josh Frydenberg will unveil the plan this week. Picture: David Geraghty

The government will also consult on how to regulate buy now, pay later providers like Afterpay and digital wallets offered by tech giants such as Apple and Google in a way that shines a light on any secret fees and charges while increasing competition.

Digital currencies issued by central banks — which would tie the digital dollar to the existing sovereign currency — are the subject of growing interest from financial leaders overseas.

The Reserve Bank of Australia has remained cool on the prospect so far, with payments policy head Tony Richards saying last month that they were not convinced of a “strong policy case” given Australians could already access “safe, convenient and low-cost” services online.

But he said the RBA was ramping its research as it acknowledged the innovation could “be important for safeguarding confidence in national monies” amid the rise of cryptocurrency.

Mr Frydenberg said he wanted Australia to lead the world on crypto technology that had “almost endless applications across the economy”.

The starting point will be a strategic plan for the payments system by the middle of next year, with the Treasurer to legislate new powers for him to directly address future gaps in the rules.

Government sources said the collapse of a high-profile Australian cryptocurrency trading platform this week highlighted the need for guardrails in the growing sector, which could include cyber security standards or even minimum capital requirements.