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Cryptocurrency adoption outpaces the early internet

When central banks talk about our money and cash system being at a crossroads you know real change may be on the way.

Comments from the Reserve Bank of New Zealand Governor Adrian Orr, on the need to consider the best use of digital technology to modernise our cash system, served as a welcome reminder of just how far acceptance of cryptocurrencies has come.

Just as we have seen with the evolution of the internet, what was once an exotic new technology can quickly become almost boringly mainstream. At the same time, as the internet has shown, such ubiquitous technologies have the potential to radically transform how we live our daily lives.

Janine Grainger is the chief executive of Easy Crypto.

Orr announced on Tuesday that the Reserve Bank was commencing Central Bank Digital Currency proof-of-concept design work, taking into account the public’s feedback received during recent consultation.

While Aotearoa New Zealand still needs to ensure cash is an option, the changes required to build an efficient, resilient system would be far-reaching, Orr said.

Around the world others have been quick to agree, including the Bank of England, which is advancing similar work.

In the business world, the Commercial Bank of Australia (owners of ASB Bank) expects to offer cryptocurrency purchases soon. Mastercard and PayPal already offer cryptocurrency services and charities like Plunket, Unicef and ChildFund accept cryptocurrency donations.

In April last year, the Financial Services Council of New Zealand reported a threefold jump in Kiwis’ investment in the new currencies in just the previous 12 months.

This growing confidence was reflected in the Reserve Bank’s assessment that a digital currency can be developed that is both economically innovative and protects key user requirements for security and privacy.

Just as the internet made information digital, cryptocurrency makes value digital. The implications of that will be huge, and the true extent won’t be seen for many years yet.

A Bitcoin symbol is presented on a screen during the closing ceremony of a congress for cryptocurrency investors in Santa Maria Mizata, El Salvador in November.

On a global scale, cryptocurrency provides for decentralised secure financial transfer independent of any bank or government. Adrien Gheur, founding partner of deep-tech focused venture capital firm Nuance Capital, notes a tailor in India can confidently collect payment for work as easily as a lawyer in New York. A domestic worker in Dubai can remit earnings to family in the Philippines without high intermediary charges.

Traditional banking has been with us for a hundred years, and until recently was the only form of banking we knew. But just as paper money replaced copper coins, technology will keep bringing changes. The important thing is that trust endures.

Blockchain computer technology provides a tamper-proof store of information. In the US doctors and patients use it to transfer sensitive information. The same approach allows for a decentralised secure form of financial transfer.

As with any change there will need to be ongoing work to improve the system. One clear example with blockchain is energy use. This has been recognised as an issue that must be addressed, and 2021 saw significant progress towards both low-energy systems and use of renewable energy. Making crypto a green industry won’t happen overnight, but it will happen.

The biggest hurdle however is likely to be human. Just as medieval merchants initially baulked at swapping a gold sovereign for a piece of paper, many will want time to adjust. Right now, we are seeing a cryptocurrency adoption rate of about 10 per cent among New Zealanders. This is still low, but it’s growing very fast.

Among Kiwis, the cryptocurrency adoption rate is about 10 per cent.

No one knows what the price of various currencies will be tomorrow. What I can say is that the currencies of the future are likely to be a mix of the old and the new based on what works best for their users, and will increasingly be digitised, along with the financial infrastructure that supports them.

Just as the internet created a global village for information, cryptocurrencies now offer one for directly transferring value. The adoption rate for cryptocurrencies is tracking ahead of that of the internet in its formative years. The question is no longer whether they will grow, but how big and how fast.

Feedback is open till March 7 on the RBNZ’s issues paper Future of Money – Cash System Redesign | Te Moni Anamata – He Whakahou i te Pūnaha Moni.

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