Australian CBDC Pilot for Digital Finance Innovation
The Reserve Bank of Australia is studying the
potential benefits of launching a Central Bank Digital Currency (CBDC). The Central
Bank released a white paper outlining its objectives and invited interested
parties to participate with proposals.
Central Bank to Pilot CBDC until the Middle of 2023
The Reserve
Bank of Australia (RBA) has set out to explore use cases for a digital version
of the Australian dollar. It is collaborating on the project with the Digital
Finance Cooperative Research Centre (DFCRC), a research program funded by the
government and the financial sector. The two have released a white paper for the Central Bank Digital Currency (CBDC).
The document
titled “Australian CBDC Pilot for Digital Finance Innovation” details the main
objectives of the initiative and the design of the new currency. The RBA has
announced that members of the industry have been invited to propose use cases
that have the potential to improve the functioning of Australia’s economy and the
financial system.
The monetary
policy regulator said that one of the key tasks is to also explore business
models that could be supported by the CBDC. The pilot project, which was
launched in July and will be completed in mid-2023, will also allow financial
authorities to understand the technological, legal, and regulatory aspects
associated with the issuance of a Central Bank Digital Currency.
The RBA has
recommended use cases, wholesale or retail, for inclusion in the pilot project,
to assess the rationale for an Australian digital currency. A wide range of
stakeholders has been invited to take part in the project, including financial
institutions, fintech firms, public sector agencies, and tech companies.
Regulators
such as the Australian Securities and Investments Commission (ASIC) and the
Australian Transaction Reports and Analysis Centre (AUSTRAC), the financial
intelligence agency, will work on any regulatory implications that may arise
during the testing phase.
Only Residents and Domestic Companies to hold eAUD during Trials
The
Australian Central Bank also noted that the pilot digital currency referred to
as eAUD in the document, will be denominated in Australian dollars. The coins
in circulation will be capped at an amount that will be determined by the RBA,
taking into account the requirements of selected use case providers.
Only
Australian residents and entities registered in the country will be allowed to
hold eAUD without any interest. All end users will need to be invited by an
approved use case provider or know-your-customer provider. The CBDC will be
stored in both custodial and noncustodial wallets.
The Reserve
Bank of Australia specifically remarked that its research project does not
reflect intentions to end the use of paper money. “The RBA is committed to
ensuring Australians continue to have good access to physical cash for as long
as people need or want to use it,” the authority explained.
Amid the
growing spread of cryptocurrencies in the past few years, dozens of central
banks around the world have started exploring the option of issuing digital
versions of their fiat currencies and a few have already launched pilot
CBDC projects.
In
mid-August, Australia’s securities watchdog insisted that the
increased popularity of cryptocurrencies makes a “strong case for regulation.”
ASIC quoted a survey, according to which 44% of the country’s retail investors
held crypto in late 2021. Later that month, the Australian Treasury announced a
plan to stock take crypto holdings.
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