Cryptocurrencies and blockchain technology are opening up new opportunities for Australian industries, and are likely to become more widely adopted over the next five years. Revenue in the Cryptocurrency Exchanges industry in Australia is projected to grow at an annualised 11.8% over the five years through 2025-26, to $51.0 million.
‘Blockchain is the technology that underpins cryptocurrencies. Industries across the economy are expected to increasingly apply blockchain technologies to drive efficiency improvement in the years ahead,’ said IBISWorld Senior Industry Analyst Yin Yeoh.
What is blockchain, and what is it for?
Blockchain is a system built on encrypted data ‘blocks’, which enable information to be distributed but not copied. The ability to distribute information securely and quickly has wide-ranging implications for industries beyond the Finance sector.
‘Blockchains use the theory that every member of a peer-to-peer system has a record of a transaction, enabling anyone to see everyone else’s transactions in near real-time. This makes it almost impossible for a single user to fraudulently create, change or delete data,’ said Ms Yeoh.
While this sounds like a simple concept, it has the potential to eliminate huge amounts of record-keeping, reduce data-storage costs and streamline supply chains.
‘Put simply, blockchain can enable trust-less collaboration between anonymous parties while maintaining an auditable trail of all interactions,’ explained Ms Yeoh.
One example of blockchain implementation is the emerging use of smart contracts in the Legal Services industry.
‘Smart contracts are a digital representation of the mutual agreements in a traditional contract document. Smart contracts cannot be modified without the participating parties' permission, increasing security. In addition, smart contracts can automatically execute orders once certain conditions are met, increasing efficiency,’ said Ms Yeoh.
Blockchain could also be used in the Health Services industry to store and share medical records, or in the Port and Water Transport Terminal Operations industry to improve the efficiency of cargo movements.
‘Moving cargo through ports requires the time-consuming processing of numerous documents, such as bills of lading, sales contracts and charter party contracts. Blockchain could be implemented here to quickly deliver contracts and facilitate exchanges,’ said Ms Yeoh.
The hurdles for cryptocurrencies
Cryptocurrencies, such as the infamous Bitcoin, are the most widely known application of blockchain technology. Although public awareness is rising, digital currencies will have to overcome major barriers before they become more widely accepted by businesses.
‘One key factor that could make or break cryptocurrency is whether it can outgrow the financial-tech enthusiast crowd to join the real economy. The extreme price volatility of cryptocurrencies discourages both retail investors and merchants from adopting digital coins as an effective medium of exchange,’ said Ms Yeoh.
Bitcoin reached an all-time high of USD$42,000 in January 2021, largely driven by low interest rates stemming from the COVID-19 pandemic. Cryptocurrencies have been associated with money laundering and illegal trade through the dark web, which has prevented further mainstream adoption.
‘A lack of a regulatory safety-net dissuades many businesses from accepting cryptocurrency payments. For example, if a fraudulent transaction occurs, banks may refund the victim. However, a fraudulent transaction conducted through cryptocurrency cannot be reversed,’ said Ms Yeoh.
Despite these drawbacks, cryptocurrency adoption is on the rise in Australia. Brisbane Airport became the first airport in the world to accept cryptocurrency payments in 2018, allowing travellers to make purchases with digital currencies such as Bitcoin, Litecoin and Ethereum at more than 30 retail and dining outlets located throughout the airport terminals. While businesses have yet to accept bitcoins, Australia has 46 Bitcoin ATMs, allowing Bitcoin holders to purchase or cash out Bitcoins.
A path forward for cryptocurrency and blockchain
The National and Regional Commercial Banks industry has shown a growing interest in cryptocurrencies. In 2019, JPMorgan Chase introduced its own cryptocurrency, JPM Coin, which is primarily used for funds transfers and faster transaction settlements among clients. PayPal has also recently entered the cryptocurrency market, enabling their customers in the United States to buy, sell and hold Bitcoin, Ethereum, Litecoin and Bitcoin Cash using their PayPal accounts. PayPal is expected to support cryptocurrencies for merchant payments in early 2021.
In November 2020, the Reserve Bank of Australia announced a new digital currency research partnership with Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys Software. The purpose of this partnership is to explore the potential use and implications of a wholesale form of central bank digital currency based on blockchain technology.
‘While the outlook for unregulated cryptocurrencies is uncertain, financial regulators are anticipated to take a growing interest in the power of blockchain and the potential digitalisation of their own currencies in the years ahead,’ said Ms Yeoh.
IBISWorld reports used to develop this release:
- Cryptocurrency Exchanges in Australia
- Finance in Australia
- Legal Services in Australia
- Health Services in Australia
- Port and Water Transport Terminal Operations in Australia
- National and Regional Commercial Banks in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com
