The Reserve Bank of Australia is studying the potential benefits of launching a central bank digital currency. The monetary authority released a white paper outlining its goals and invited stakeholders to participate with proposals and pilot projects.
Australia’s central bank to pilot CBDC until mid-2023
The Reserve Bank of Australia (RBA) has set out to explore use cases for a digital version of the Australian dollar. It is doing so in collaboration with the Digital Finance Collaborative Research Center (DFCRC), a research program funded by the government and the financial sector. This week, both released awhite paperon central bank digital currencies (CBDCThe document, titled
Australian CBDC Pilot for Digital Finance Innovation, details the main objectives of the initiative and describes the design of the new currency. Industry members are invited to propose use cases that could improve the functioning of Australia’s economy and financial system, the RBA said.
Monetary policy regulators said one of the key challenges is to also explore business models that could be supported by CBDCs. the pilot project, which began in July and is expected to be completed in mid-2023, will allow monetary authorities to explore the technical, legal, and regulatory issues associated with issuing a central bank digital currency. It will also allow for a better understanding of the technical, legal, and regulatory aspects related to the issuance of central bank digital currencies.
Wholesale or retail compelling use cases will be included in the pilot and used to assess the rationale for a digital currency in Australia, the RBA said. A wide range of stakeholders are welcome to participate in the project, including financial institutions, fintech companies, public institutions, and technology companies.
Regulators such as the Australian Securities and Investments Commission (ASIC) and the country’s financial intelligence agency, the Australian Trade Reporting and Analysis Center (AUSTRAC), will also be involved to address any regulatory implications that may arise during testing.
Only residents and domestic businesses will hold Australian digital currency during the pilot
The Australian central bank also noted in the document that the pilot digital currency, called eAUD, will be denominated in Australian dollars with its liability. The coins in circulation will be capped at an amount to be determined by the RBA, taking into account the requirements of the selected use case provider.
Only Australian residents and legal entities registered in Australia will be able to hold eAUD, and no interest will accrue on their holdings. All end users must receive an invitation from an approved use case provider or customer information provider; CBDC will be held in both custodian and non-custodian wallets.
The Reserve Bank of Australia has clearly stated that its research project does not reflect an intention to end the use of banknotes. The official stressed, “The RBA is committed to ensuring that Australians continue to have good access to physical cash for as long as people need or want to use it.”
Over the past few years, as cryptocurrencies have become increasingly popular, dozens of central banks around the world have begun exploring the option of issuing digital versions of fiat currencies, and several have already launched CBDC pilot projects.
In mid-August, Australia’s securities watchdog argued that the growing popularity of cryptocurrencies makes a “strong case for regulation”; ASIC cited a survey, according to which 44% of the country’s retail investors held crypto in late 2021. Later that month, the Australian Treasury announced plans to stock crypto holdings.
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