In what promises to be the hottest currency issued by the Reserve Bank of Australia (RBA) since 1981’s Charles and Diana 50 cent wedding coins, the RBA will launch a pilot central bank digital currency (CBDC) as part of a research project to assess use cases and potential economic benefits.
The RBA is collaborating with the Digital Finance Cooperative Research Centre (DFCRC) on the research project to explore the feasibility and possible technical design of CBDC, alongside the potential uses for new technologies such as distributed ledgers.
The DFCRC is a 10-year, $180 million research program funded by industry partners, universities and the Australian Government to explore the future of currency and payments.
DFCRC CEO Dr Andreas Furche said: “CBDC is no longer a question of technological feasibility. The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.”
Central to the bank’s thinking is whether a CBDC can improve on the existing financial infrastructure in countries such as Australia with well-functioning payment and settlement systems.
The pilot is expected to take about a year to complete, developing a limited-scale CBDC in a ring-fenced environment where the currency nonetheless has a real claim on the Reserve Bank.
“The project will also be an opportunity to further understanding of some of the technological, legal and regulatory considerations associated with a CBDC,” the RBA said.
That means that unlike popular cryptocurrencies such as Bitcoin and Ether, the RBA-issued CBDC will have the same validity as cash.
“The Bank and the DFCRC will select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC.”
A report on the findings from the project will result, with the findings shaping ongoing research into the desirability and feasibility of a CBDC in Australia.
The project with the DFCRC will help address this gap by focusing on innovative use cases and business models that could be supported by the issuance of a CBDC.
Australian Treasury is involved via the project’s steering committee and a paper will be published shortly to explain the pilot’s objectives and approach and how industry participants will be able to engage.
RBA Deputy Governor Michele Bullock 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.”