The Potential Impact of Digital Currencies on the Australian Economy

Crypto-currencies, like Bitcoins, are a relatively recent phenomena on the online Internet landscape and an emerging force in the financial sector. While not conforming to traditional institutional practices, they are gaining increasing acceptance as viable commercial currencies. With this technology presenting new opportunities, and its future largely dependent on external challenges, this conceptual paper discusses the potential impact of digital currency technology on the Australian economy. It includes (i) the payments sector, (ii) the retail sector, and (iii) the banking sector; and explores potential ways in which Australia can take advantage of digital currency technology to establish itself as a market leader in this field. The emergence of this new and potentially disruptive technology provides both opportunities as well as risks. The paper also highlights the potential impact of any tax regime that harshly penalises users of crypto-currencies. In order to support innovation and the needs of the growing Australian digital currency industry it is important to define digital currencies and examine the impact regulatory frameworks could have on the further adoption and diffusion of the technology.