The Australian Monetary Authority is launching an investigation into the potential economic impact of central bank digital currency issuance. In this project, regulators intend to identify use cases and develop a limited scale pilot.
Central Bank of Australia to work on digital currency program
The Reserve Bank of Australia (RBA) has announced the launch of a research program to explore the benefits of issuing a central bank digital currency (CBDC) to the country’s economy. The project, which will take approximately one year, will be realized with the Digital Finance Collaborative Research Center (DFCRC), an industry group funded in part by the Australian government.
In addition to clarifying certain legal, regulatory, and technical aspects, the project also aims to identify innovative use cases for state-issued digital currencies and business models that can be supported through the CBDC, the financial regulator said in a statement
According to a survey conducted by the Bank for International Settlements in 2021, the majority of central banks are studying the feasibility of CBDC. While acknowledging that progress has been made in that regard, including exploring the possibility of implementing technologies such as distributed ledgers, the RBA noted that.
An issue that has not received much attention, especially in countries like Australia, which already have relatively modern and well-functioning payment and settlement systems, is the use case for CBDC and the potential economic benefits of implementing CBDC.
As part of this initiative, a pilot of limited scale will be developed in a closed environment with pilot CBDCs, which are actual claims against the Reserve Bank, the RBA also revealed, as cited by Reuters. CBDCs interested industry participants will be invited to develop solutions that demonstrate how to use it to offer new payment services to both households and businesses, the official added.
The RBA and DFCRC will select a variety of use cases to be included in the pilot. Their evaluation will be provided in a subsequent report. The results will contribute to ongoing research on the desirability and feasibility of CBDC in Australia. In addition to the two institutions, the Australian Treasury will be a member of the project’s steering committee.
Reserve Bank of Australia Deputy Governor Michelle Block explained that the program is an important next step in research on central bank digital currencies as regulators seek to better understand the potential benefits.
“CBDC is no longer a technical feasibility issue. The key research question now is what economic benefits CBDC enables and how it can be designed to maximize those benefits,” added Andreas Furche, Chief Executive Officer of the DFCRC.
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