The Reserve Bank of Australia (RBA) has partnered up with the Digital Finance Cooperative Research Centre (DFCRC) to explore possible use cases for a central bank digital currency (CBDC) in Australia.
Contrary to its name, a CBDC is different to decentralised digital assets, such as Bitcoin. CBDCs are solely controlled by a central authority, like the RBA, and operate similar to cash. The RBA will have the power to print its CBDC and use the CBDC to mimic Australia’s dollar in the digital landscape.
The pilot with the DFCRC will involve the development of a CBDC which will operate within a controlled environment and have a real claim by the RBA. For the pilot’s purpose, the CBDC will not be money legally speaking but it will be supported by the RBA so that participants may use it as if it were legal tender. Although, the use of the CBDC will be limited to the scope of the pilot experiment. By conducting this project, industry participants will be able to demonstrate innovative and economical situations where the CBDC may be used. Since cryptocurrency has proven its viability in modern economic systems, CBDCs are no longer a question of technological feasibility. What matters now is what economic benefits CBDCs may bring and how they can be designed to maximise those benefits.
The project is expected to take over a year to complete and the RBA plans to publish its results with the support of research already done into blockchain technology. An interim paper will be released in the coming months detailing the objectives and approach of the pilot and how industry participants will be able to engage. While private banks are concerned about the stability of an RBA-controlled CBDC, this pilot presents an opportunity to bring widespread attention to CBDCs and the technological, legal, and regulatory complications that may come with it.
For a full reading of the media release, see here.
