Why Australia is a “follower” when it comes to CBDC adoption

Australia will be a global “follower” in terms of central bank digital currencies (CBDC) adoption, according to Ross Edwards, senior director of client solutions and delivery for CBDC at Ripple.

Edwards told Digital Nation that due to our robust payment system and the high trust of the financial institutions in Australia, we will not be leading the adoption of CBDCs.

“We will see that countries that have greater simpler needs such as holding value and transacting will be the initial countries to make use of CBDCs,” he explained.

Australia will be a follower in this space, a follower of those countries and probably a follower of other major economies, Edwards explained.

“Particularly when you look at the developments in Europe as an example with the European Central Bank," he said,

"The RBA and DFCRC are running a program at the moment that is looking at future use cases of CBDCs. This is very important to the direction and adoption of CBDCs in Australia. 

“We need to be looking at how these are going to be different or provide different services and unique value to businesses and consumers and not simply at the infrastructure.”

Edwards said this will take time and involve other elements of the economy.

“Typically, it will be about transactions or entire business transactions and how these can be improved, it won't simply be a payment from me to you, because that works through MPP pretty well today,” he explained.

The adoption of CBDCs will be slow, due to Australia’s conservatism with financial institutions.

“That's certainly something that's perpetuated by the government, there is a very low transition of people from across different financial institutions,” he said.

“I saw a report from Finder in the last couple of years that said 40 percent of people had loans with their childhood financial institution. Australia is very conservative in terms of the movement, particularly when I compare it to other places in APAC, and in particular Southeast Asia.”

Edwards said this conservatism isn’t necessarily a bad thing.

“Australian financial institutions are extremely strong and that is why we need to focus on the use cases and value that people are going to see out of CBDCs. It's not about replacing what they do today, but rather supplementing that providing new capabilities and improving the way they can transact today,” he said.

“Australia is well placed will be a follower in that space, but, in particular, our fintech community is strong both being involved in initiatives overseas but will be key to building out payment innovation here in Australia as well.”