February 5, 2023

Volume XIII, Number 36

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February 03, 2023

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February 02, 2023

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Digi.cash: Digital Currency for Australia

Digi.cash recently launched Australia’s first digital dollar. The e-currency, which is digitally ‘minted’ as electronically signed coins and banknotes can be used on various devices including smartphones and computers. Digi.cash currently operates under an exemption ruling by the Reserve Bank of Australia, which limits the total obligations to make payments under the facility to $10 million.

There is no doubt that digital currencies have potential uses in several areas of the Australian economy. More recently, Australia’s big banks have indicated interest in possible adoption of digital currencies. Keeping this in mind, there are a few key opportunities and risks associated with the use of digital currencies that corporations might wish to consider:

  1. Efficiency and cost reduction: With respect to cash management, digital currencies eliminate the intermediaries (such as clearing houses) with payments flowing directly between payor and payee. This reduces overall transactions costs and increases payment efficiency. A digital currency can also be used as a common currency between entities in different countries to eliminate foreign exchange costs.

  2. Privacy: Increasingly, digital currencies can be spent and held anonymously, thereby safeguarding a holder’s privacy. However, this characteristic may also be exploited by those seeking to engage in illegal activities such as money laundering and terrorism financing. The Australian Attorney General’s Department has recommended that AML/CTF regulations be applied to digital currency exchanges.

  3. Volatility: Digital currencies are susceptible to valuation volatility, especially if not pegged to a real currency. Users of digital currency therefore risk greater exposure to losses, devaluation and inflation.

  4. Taxation: The taxation treatment of digital currencies is yet to be determined in many jurisdictions. In Australia, the Government is seeking to reform the GST treatment of digital currencies, which currently results in consumers incurring double taxation when using digital currency to purchase goods and services. 

Copyright 2023 K & L GatesNational Law Review, Volume VI, Number 299

About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

Meera Sivanathan, KL Gates, product disclosure lawyer, investment management attorney

Ms. Sivanathan is a corporate lawyer in the Investment Management group. She is part of an experienced team that advises investment fund managers and other financial services providers on a broad range of day-to-day legal requirements such as fund establishment, product disclosure and distribution, investment management agreements, custody agreements and administration agreements.

Ms. Sivanathan also advises clients on financial services law compliance and regulation, registered scheme requirements, trustee powers and duties, and Australian...