Bitcoin continues to captivate speculative investors, but its extreme volatility makes it an unlikely candidate to replace traditional currencies like the US dollar. According to a CPA Australia analysis, Bitcoin’s unpredictable value fluctuations pose significant challenges for its adoption as a central bank digital currency (CBDC).
The Volatility Problem
Bitcoin’s price swings—such as its surge to $60,000 after Tesla’s $1.9 billion investment—highlight its instability. These wild fluctuations create practical issues:
- Hyperinflation & Deflation: Consumers could face erratic pricing when using Bitcoin for everyday transactions.
- Lack of Confidence: The report notes that Bitcoin’s volatility undermines its role as a medium of exchange or store of value.
👉 Discover how stablecoins compare to volatile cryptocurrencies
CBDCs: A More Controlled Alternative
While Bitcoin struggles with stability, other blockchain technologies like Ethereum and Ripple’s XRP show promise for CBDCs:
- Ethereum: Smart contracts enable programmable financial systems.
- Ripple: Its CBDC Private Ledger processes transactions 61,000x faster than public blockchains.
The Banque de France has even explored Ripple for a digital Euro, emphasizing efficiency and scalability.
Australia’s CBDC Experiment
Australia’s Reserve Bank (RBA) tested a wholesale CBDC using a private Ethereum network. However, CPA Australia argues that Australia’s advanced digital payments reduce the urgency for a retail CBDC.
“The use case for a CBDC remains an open question.”
— Michele Bullock, RBA Assistant Governor
Global CBDC Challenges
Countries approach CBDCs differently:
| Country | CBDC Stance |
|---|---|
| USA | Investigating but resistant due to dollar dominance |
| China | Leading retail CBDC development |
| EU | Pilot programs (e.g., digital Euro) |
Critics warn that poorly implemented CBDCs could “become a gigantic flop” if safety features don’t address real-world payment needs.
👉 Explore the future of digital finance
The Risks of a Cashless Society
As digital payments grow (98% of transactions in Australia by 2024), concerns arise:
- Surveillance: CBDCs could enable unprecedented financial tracking.
- Exclusion: Vulnerable groups (elderly, undocumented migrants) risk being left behind.
Countries like Sweden and the UK have introduced safeguards to mitigate these risks.
FAQ
Q: Can Bitcoin ever stabilize enough to replace the dollar?
A: Unlikely—its volatility and lack of central control make it unfit for mainstream currency use.
Q: What’s the biggest advantage of CBDCs over Bitcoin?
A: CBDCs offer stability, regulatory oversight, and integration with existing financial systems.
Q: Will Australia launch a retail CBDC soon?
A: Not immediately; the RBA is still evaluating efficiency and risk management benefits.
Q: How do CBDCs impact privacy?
A: They enable transaction tracking, raising surveillance concerns unless designed with privacy safeguards.
Q: Is a cashless society inevitable?
A: While digital payments dominate, cash remains critical for inclusivity and emergency backup.
Final Thoughts
Bitcoin’s speculative nature contrasts sharply with the stability needed for national currencies. While CBDCs present a viable alternative, their success hinges on balancing innovation with financial inclusion and privacy protections.
For now, the dollar’s dominance remains unchallenged—but the evolution of digital currencies is far from over.