The Australian Central Bank is joining the central bank digital currency (CBDC) bandwagon, kickstarting a “limited-scale” pilot in collaboration with the Digital Finance Cooperative Research Centre (DFCRC).
RBA Launches CBDC Program
The Reserve Bank of Australia (RBA) is exploring the use cases and potential benefits a hypothetical central bank digital currency could bring to the country.
The RBA published a statement Tuesday confirming its plans to create a CBDC. The announcement noted that the joint project of the Central Bank and the DFCRC would examine potential use cases and legal and regulatory considerations associated with having a CBDC in operation.
“A question that has received less attention to date, especially in countries like Australia that already have relatively modern and well-functioning payment and settlement systems, is the use cases for a CBDC and the potential economic benefits of introducing one,” the RBA posited.
It also noted that the CBDC pilot is expected to last a year and will operate in a ring-fenced environment. In a ring-fenced environment, a section of a user’s assets is separated from the rest, thus protecting one from the other in case of security breaches.
Various stakeholders in the industry will be invited to come up with distinct use cases, which RBA and DFCRC will evaluate. The selected use cases will be part of the CBDC pilot program, resulting in a unique report. With the pilot, researchers will be able to examine whether some CBDC applications could create innovative payment services for households and businesses.
The Australian central bank intends to publish a paper discussing more details on the project in the coming months.
The RBA is not the only major bank looking into developing its own CBDC. China’s own CBDC, the digital yuan, is swiftly progressing. It has appeared in stores nationwide and was also accepted as payment at the Winter Olympics games in February this year. Other countries, including Indonesia, Ghana, Sweden, Japan, the UK, and the UAE, are scrambling to ensure they are not lagging behind in the digital currency race.
The United States of America has been relatively cautious about adopting its own CBDC. However, officials like Federal Reserve Chair Jay Powell have often indicated the U.S. is looking into it.