A Year-long Research Project by the Reserve Bank of Australia has Uncovered a Number of legals, Regulatory, Technical, and Operational Issues That Could Stymie the Introduction of a Central Bank Digital Currency (CBDC)
Operating in a ring-fenced environment and involving a digital currency that is a real claim on the Reserve Bank, 14 pilot projects with a range of industry participants investigated potential CBDC use cases. The various use cases explored in the project highlighted a range of areas where tokenised money could add value, reports the RBA, including by facilitating programmable payments, atomic settlement in tokenised asset markets and offline payments. The project also highlighted opportunities for CBDC to support the development of new forms of privately-issued digital money, including tokenised bank deposits or CBDC-backed stablecoins.
In this sense, a CBDC could be viewed as an enabling complement to, rather than substitute for, private sector innovation,” notes the central bank. However, the project highlighted the need for further analysis of the legal underpinnings for a CBDC, as well as consideration of the regulatory frameworks that could apply to any new business models that may arise. The pilots also highlighted challenges in integrating a CBDC platform with industry use case applications, which has implications for potential deployment models. “Given the many issues that are yet to be resolved, any decision on a CBDC in Australia is likely to be some years away,” the report states. Brad Jones, RBA assistant governor, comments: “The key findings from the project will help to shape the next phase of the RBA’s research programme into the future of money in Australia. Alongside our ongoing work on cross-border payments, this will include deepening our understanding of the role that tokenised asset markets and programmable payments could have in the Australian economy.”
Australian banks and fintechs to test use cases for CBDC
The Reserve Bank of Australia is kicking of 14 pilot projects to investigate potential use cases for a central bank digital currency.
The projects will operate in a ring-fenced environment and involve a digital currency that is a real claim on the Reserve Bank.
First announced in August, the RBA says the project received a “large number” of use case submissions from a range of industry participants.
Selected pilot projects involve offline payments with ANZ, nature-based asset trading in a combined proposal from ANZ and Commonwealth Bank, interoperable CBDC for Web3 Commerce with Mastercard and Cuscal, and a corporate bond settlement use case submitted by the Australian Bond Exchange, among others. Of Australia’s Big Four banks, ANZ is involved in four projects, while Commonwealth Bank takes two of the spots. Westpac and NAB are notable by their absence.
Brad Jones, assistant governor at the RBA says: “It has been encouraging that the use case providers that have been invited to participate in the pilot span a wide range of entities in the Australian financial system, from smaller fintechs to large financial institutions. The pilot and broader research study that will be conducted in parallel will serve two ends – it will contribute to hands-on learning by industry, and it will add to policy makers’ understanding of how a CBDC could potentially benefit the Australian financial system and economy.”
A report on the project is expected to be published around the middle of the year.
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Australian CBDC Pilot for Digital Finance Innovation
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Resources:
https://www.finextra.com/newsarticle/41898/australian-banks-and-fintechs-to-test-use-cases-for-cbdc
https://www.rba.gov.au/payments-and-infrastructure/central-bank-digital-currency/pdf/australian-cbdc-pilot-for-digital-finance-innovation-project-report.pdf
