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The RBA has announced plans to conduct a yearlong pilot research phase for CBDC applicability in Australia.
The Reserve Bank of Australia (RBA) is launching a pilot to explore use cases of a CBDC (Central Bank Digital Currency). The Australian central bank looks to create a CBDC that will operate in a ring-fenced environment. However, the bank wants to first probe the potential economic benefits. For its “limited-scale” pilot, the Reserve Bank of Australia is collaborating with the Digital Finance Cooperative Research Center (DFCRC). Some of the feasible and technical aspects of this examination phase include “exploring the potential use of new technologies such as distributed ledger technology.”
Details of CBDC Pilot Program in Australia
The Reserve Bank of Australia’s CBDC pilot research program will take around one year to complete. Regardless, the Australian apex bank will publish a paper detailing the project’s objectives in the next few months. In addition, the RBA will make the one-year research program open to interested industry bodies.
In its press release, the RBA explained:
“Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses.”
In addition, the governing Australian financial institution stated that “the Bank and the DFCRC will select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC. A report on the findings from the project, including an assessment of the various use cases developed, will be published at the conclusion.”
Although the central banks of numerous developed countries are exploring CBDC rollouts, the RBA remains undecided about adopting one. However, the Australian apex bank admits this pilot phase will provide insight into CBDC feasibility in the Oceanic country. Speaking directly to this, Dr. Andreas Furche, CEO of the DFCRC notes:
“The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.”
The ring-fenced nature of the pilot rollout means that the program will operate in a part of the financial assets environment separate from the rest. This is a precautionary strategy to potentially secure one group of assets from the other in case a breach occurs.
RBA CBDC Agenda
The RBA first hinted at CBDC exploration in 2020 with the development of a proof-of-concept (POC) in partnership with ConsenSys. However, the POC was for issuing tokenized digital dollars for wholesale market use. Back then, the RBA also partnered with various banks and financial institutions, including Commonwealth Bank, National Australia Bank, and Perpetual. The 2020 initiative relied on distributed ledger technology (DLT) and covered wholesale marketing activities such as funding, settlement, and repayment. However, with this current CBDC research program, the RBA is targeting potential use by households as well as businesses.
China seems to be one of the few countries well-established so far in CBDC adoption and issuance. The country’s digital yuan, or e-CNY, saw mainstream extended tests at February’s Winter Olympic Games.