The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) recently embarked on a major research project to explore the potential of a central bank digital currency (CBDC) in Australia.
Digital currency, available exclusively in electronic form, offers numerous advantages over traditional money. Unlike the electronic currency in your bank account, digital currency never takes physical form. You can’t withdraw it as cash; it exists solely within a computer network and is exchanged via digital means.
Australia’s investigation into CBDC involved issuing a limited-scale ‘pilot’ CBDC in a controlled environment. The pilot, a real legal claim on the RBA, allowed selected industry participants to demonstrate innovative payment and settlement services. This initiative highlighted the practical applications of a CBDC and its potential to enhance the country’s financial system.
The project received overwhelming industry interest, with around 110 use case submissions. From these, 16 were chosen to participate in the pilot, showcasing various uses for tokenised money. These included programmable payments, atomic settlement in tokenised asset markets, and offline transactions. These applications underscored the versatility and efficiency digital currency could bring to the Australian economy.
Additionally, the pilot shed light on several crucial aspects needing further analysis. For instance, the legal foundations for a CBDC, regulatory frameworks for new business models, and the technical challenges of integrating a CBDC platform with industry applications require more in-depth research. These insights are essential for Australia as it moves towards potentially adopting a CBDC.
The project also demonstrated the importance of collaboration between industry and policymakers. Active engagement from industry participants, as well as support from ASIC, AUSTRAC, and the Treasury, enriched the project’s outcomes. This collaborative approach is vital for understanding the opportunities and challenges associated with digital currency.
While Australia is not yet ready to fully implement a CBDC, the findings from this project lay the groundwork for future research. The RBA and DFCRC plan to continue exploring the policy case for a CBDC.
Given the complexities involved, a decision on a CBDC in Australia is still years away. However, the potential benefits of digital currency, such as faster payments, lower transaction costs, and improved financial inclusion, make it a promising area for continued exploration and development.
Read also: Strategic Advisory unveils new deep tech commercialisation initiative
A new knowledge platform and website aimed at assisting the communications industry and its professionals. Contribute your op-ed, press releases, how-to articles, videos and infographics at media@commsroom.co
