- L Misthos and M Bacina
Reserve Bank of Australia to launch CBDC pilot
The Reserve Bank of Australia (RBA) has announced it is working with the Digital Finance Cooperative Research Centre (DFCRC) to launch a limited-scale CBDC pilot that will operate in a ring-fenced environment and involve a pilot CBDC that is a real claim on the Reserve Bank.
The RBA has identified a 'gap' between Australia's well-functioning payment and settlement system, and the use cases and potential economic benefits of CBDCs. Innovative use cases and business models that may benefit from the introduction of a CBDC will be reviewed as part of the project.
In a media release, the RBA and DFCRC indicate further exploration in the space:
The project will also be an opportunity to further understanding some of the technological, legal and regulatory considerations associated with a CBDC.
The project, which is expected to take a year to complete, will call on industry participants to develop specific use cases that demonstrate how a CBDC can be used in Australia to provide innovative and value-added payment and settlement services to households and businesses.
A range of different interested industry participants will be considered as part of the pilot based on their potential to provide insight to the project. Once concluded, a findings report that assesses the various use cases will be published. The RBA has undertaken 'considerable research' into the feasibility and technical design of a CBDC with particular attention being given to innovative technology such as distributed ledger technology.
Dr. Andreas Furche, CEO of the DFCRC affirmed the likelihood of a CBDC in Australia is dependent on the economic benefits it could provide.
CBDC is no longer a question of technological feasibility. The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.
It's been two years since the RBA's Australian Senate FinTech & RegTech Inquiry Submission confirmed that its internal 'Innovation Lab', established in late 2018, had been considering the merits of a CBDC in the context of the RBA's responsibilities.
A year later, in September 2021, the RBA posted a job advertisement for a CBDC team to research whether there is a case for CBDC in Australia. It appears now that the working group has decided there is enough merit in CBDCs, and the underlying technology, to welcome submissions from interested participants.
Australia will join the United States, France, Cambodia, England, United Arab Emirates, Singapore and China as one of the countries exploring and testing CBDCs as a way to innovate the financial space.
CBDCs can provide notable benefits to the Australian economy, the blockchain-based technology allows for more efficient and cost-effective cross-border payments, transaction transparency and innovation such as being able to establish a programmable payment system.