Australians are choosing digital payments over cash. The shift is enabled by advancements in financial technology.
Reserve Bank of Australia (RBA) statistics highlight the decline. In 2007, almost 75 per cent of payments were made with cash. In 2019, that figure was just 27 per cent. Further RBA data shows exponential growth of cashless payments since 2007.
Australia could become cashless in the future. Central banks govern a nation’s momentary system. Therefore, it is central banks that could innovate to create a comprehensive cashless system.
Stablecoins are an option to explore. They’re cryptocurrencies designed to maintain price stability, by pegging their value to an external reference asset. Reference assets could be fiat currencies like the US Dollar.
Tether is one example of a stablecoin. Valued at AU$21.6 billion, it’s the largest stablecoin by market capitalisation. Its price is pegged to the US Dollar. One Tether must always equal one US Dollar.
Stablecoins are borderless. They have no governing body. However, central banks have an opportunity to innovate to keep pace with the changes in digital finance.
Central bank digital currencies (CBDC) are a potential solution.