The Reserve Bank of Australia will trial its own digital currency as part of a research project to evaluate the future of Central Bank Digital Currencies (CBDC) in Australia.
- The RBA will launch a pilot central bank digital currency (CBDC) as part of a research project
- The CBDC will be a real claim on the Reserve Bank, meaning it will be recognized as legal currency
- The research project is expected to last for a year and assess the possible uses for a CBDC and challenges that need to be addressed
Unlike well known cryptocurrencies such as Bitcoin and Ether, which were created by private entities or individuals, a CBDC is issued and controlled by the central bank just like cash and electronic stores of sovereign currency sitting in bank accounts.
The research project the RBA is undertaking in collaboration with the Digital Finance Cooperative Research Center (DFCRC) will focus on the uses for, and potential economic benefits of, a CBDC.
“The project, which is expected to take about a year to complete, will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time and is intended to involve a pilot CBDC that is a real claim on the Reserve Bank,” the RBA noted in a media release.
“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.”
RBA deputy governor Michelle Bullock said this project is “an important step” on the path to a potential Australian CBDC.
“We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia,” she said in a statement.
Dr Andreas Furche, the chief executive of the DFCRC which is undertaking the research project with the RBA, said the doubts around CBDCs are mainly focused on how useful they could actually be, and in what ways.
“CBDC is no longer a question of technological feasibility,” he argued.
“The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximize those benefits.”
The Reserve Bank said Treasury is involved with the project, which will soon invite industry participants to pitch specific uses for a CBDC that might be selected for trials in the pilot.
The project will then help to understand some of the technological, legal and regulatory issues that arise from a CBDC.
A report on the results of the project is expected in about a year’s time.