Whereas Australia already has a modern, and well functioning payments infrastructure, it continues to explore the potential economic benefits that would arise from the introduction of a Central Bank Digital Currency (CBDC).
The Reserve Bank of Australia (RBA) has partnered with the Digital Finance Cooperative Research Centre (DFCRC) in a pilot project to identify use cases and business models that could be supported by the issuance of a CBDC, according to a White Paper “Australian CBDC Pilot for Digital Finance Innovation”, dated September 26, 2022. The pilot project is expected to publish a report of its findings around mid 2023.
Worth noting for participation in the RBA-DFCRC pilot project is that all use case providers must comply with all relevant laws and be in possession of the relevant licences and permits. According to the white paper, use case providers may be existing financial institutions, public sector agencies, established businesses, fintechs, start-ups and technology providers.
The RBA has collaborated on other projects to explore the use of CBDCs. In March 2022, under “Project Dunbar”, a collaboration between the RBA, the Bank for International Settlements (BIS) Innovation Hub Singapore Centre and three other central banks, explored how a common platform for multiple central bank digital currencies could enable cheaper, faster and safer cross-border payments. This project is expected to last for about a year.
In 2020-2021, the RBA, under “Project Atom”, collaborated with the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Perpetual and ConsenSys, and King & Wood Mallesons (KWM) to develop a proof-of-concept (POC) for the issuance of a wholesale CBDC for the funding, settlement and repayment of a tokenized syndicated loan on an Ethereum-based platform.
During the Australian Payments Network Summit in December 2021, Philip Lowe, Governor of the Reserve Bank of Australia, highlighted possible use cases for digital tokens or account-based forms of digital money for both retail and wholesale payments:
Lowe said: “One possibility is that the tokens are issued by, and backed by, the RBA, just as we issue and back Australian dollar banknotes. This would be a form of retail central bank digital currency (CBDC) – or an eAUD.”
Lowe further said that another possibility would be a stable coin, issued and backed by an entity other than the central bank, though still denominated in Australian dollars.
On wholesale use cases, Lowe said: “The RBA has been examining the case for some form of wholesale CBDC, which can be thought of as a new tokenised form of exchange settlement account balances. This could be used to settle transactions of tokenised assets on different blockchains”.
The RBA is engaging in a stakeholder-wide collaborative process in establishing the desirability and feasibility of a CBDC in Australia.
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