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Australia’s central bank to launch digital currency pilot

australia dollar cbdc digital currency

The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) are launching a one-year pilot project for central bank digital currency (CBDC). The goal is to work with the business sector to establish innovative use cases and business models demonstrating the economic benefits of introducing a CBDC.

“CBDC is no longer a question of technological feasibility,” said Dr Andreas Furche, CEO of the DFCRC. “The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.”

As part of its work on exploring the viability of a CBDC, the Australian Treasury will participate in the project’s steering committee. Unlike the mass experiments for China’s digital yuan, this one will be of limited scale in a ring-fenced environment.

While there’s a reference to providing “value-added payment and settlement services to households and businesses,” the announcement doesn’t mention whether this will be a wholesale bank-focused pilot, a consumer-focused retail CBDC, or a combination of the two.
Update: the DFCRC confirmed to Ledger Insights that it will involve retail and wholesale CBDC.

Both the central bank’s and DFCRC’s past work have been biased towards wholesale CBDC. In the case of the Reserve Bank, at the end of 2021, it published results from a proof of concept of a wholesale CBDC, Project Atom, with the Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys. It’s also a participant in the multi-CBDC Project Dunbar, which targets cross border payments and uses wholesale CBDC.

Turning to the DFCRC, much of its work revolves around digital securitiesdigital assets and tokenization. Many experiments worldwide have focused on the potential for wholesale CBDC for digital asset settlements, although a retail CBDC would also be handy where there is disintermediation.

The DFCRC stated that the pilot CBDC will be deliberately broad and experimental to enable integration with a wide range of use cases. The pilot’s objective is as a decision-making tool rather than reflecting a decision to issue a CBDC or its future design.

The DFRC is working with Trovio on security aspects and is inviting companies to participate in both the consultation and potentially implementation of a narrower set of applications.

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