The Reserve Bank of Australia (RBA) has just announced that it will launch a one-year research program to evaluate the advantages and disadvantages for a central bank digital currency (CBDC) in Australia.
The concept of a CBDC has taken the world by storm. The exploding crypto sector has catalysized the growth of the Central Bank Digital Currency. Interistingly, 105 countries, representing over 95 per cent of global GDP, are exploring a CBDC. 19 of the G20 countries are exploring the central bank issed virtual currency, with 16 already in development or pilot stage.
Pilot Program to Operate in a ‘Ring-fenced’ Environment
We are partnering with the @DigiFinanceCRC on a project to explore use cases for CBDC – https://t.co/crpkKAApiw#rba #CBDC pic.twitter.com/s5WYBO6Wdv
— Reserve Bank of Australia (@RBAInfo) August 8, 2022
According to the latest reports, Australia’s central bank is collaborating with the Digital Finance Cooperative Research Centre (DFCRC), a government-backed industry group, to explore, “use cases for a CBDC and the potential economic benefits of introducing one.” The pilot project will be used to identify the feasibility and possible technical design of CBDC, in particular exploring the potential use of new technologies such as distributed ledger technology (DLT).
The year long research will entail the development of 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 RBA. A ring-fence environment separates a portion of the user’s financial assets from the rest, potentially securing one from the other in case of a breach. Michele Bullock, RBA Deputy Governor said,
“This project is an important next step in our research on 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.”
Why is it Important to Learn the Fundamentals of CBDC?
During the 12 months of the program, 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 Australian Treasury, will also take part in the program along with RBA in order to explore the viability of a CBDC in Australia.
Bullock, emphasized that the key objective is to learn the fundamentals and background of CBDC and why is it needed in the first place. He added,
“This project is an important next step in our research on 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.”
