Cryptocurrency Update

Australia lagging behind cryptocurrency boom

Australia risks being left behind with digital assets if regulators and large institutions don’t pick up their game. The local blockchain industry says Australian banks will be beaten by international companies if they don’t line their ducks up, however, regulators are holding back innovations.

Money is flowing into digital assets with some major payment processors getting involved, including Paypal, Mastercard and Stripe. While much is happening overseas, Australia seems to be dawdling. For example, not a single superannuation fund in Australia has offered a cryptocurrency option, despite research indicating that half those aged under 35 would be interested in investing in such options.

One company, Independent Reserve, has stepped in to fill the gap, with over 9,000 self-managed superannuation options invested in cryptocurrency. Australian banks are also frustrated, as customers head to overseas companies for services.

So what’s the problem? Regulators have hung back on making rules for cryptocurrencies and putting them into place, with AUSTRAC being open and proactive, but the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) not being as interested, though the RBA says it is looking into digital versions of the Australian dollar in private.

Bitcoin price sinks under weight of environmental concerns

Mining bitcoin is an extremely energy-hungry activity that is presenting its own problems in terms of bitcoin being a sustainable investment. Recently Tesla’s founder, Elon Musk, said his company will no longer be taking payment via bitcoin because of its environmental footprint. This statement has sent cryptocurrency prices overall in general into a freefall.

Bitcoin mining takes computer power, day and night. There are 21 million coins available, with 18 million already ‘discovered’ and in circulation. To mine just one bitcoin, a computer must solve a riddle, with one bitcoin issued every 10 minutes to the ‘winner’, then the game resets. The computers doing the mining are maintaining the records in the blockchain of every bitcoin transaction ever made, making the cryptocurrency separate from central banks.

Each computer is in competition with all the others, so the more computing power a miner has, the greater chance of ‘winning’ a bitcoin. Surges in the price of bitcoin make it worth investing in computer power, however, the more computers in the game, the more difficult the riddles are to solve.

Countries with low levels of regulation are doing the majority of the mining, with China doing around 65 per cent of all bitcoin mining globally in April 2020. Bitcoin mining could use some renewables investment since the total computing power running to mine bitcoin right now is about 60mn tons of CO2 per year - the same as a small country.

Some believe the computing power is not being wasted; that there is inherent value in bitcoin and it is here to stay. Others criticise its environmental footprint for something that is as worthless as a promise. Flawed it is, but it’s not going anywhere soon.