The Reserve Bank of Australia (RBA) and its various bodies responsible for financial regulatory issues have been conducting research on implementing a Central Bank Digital Currency (CBDC) and possible uses of digital financial assets.
In a submission to the Senate Select Committee on Australia as a Technology and Financial Centre , the RBA in partnership with the Council of Financial Regulators (CFR) has “recognised the potential for SVFs [stored-value facilities] to play a more prominent role in the payment system, and the recommendations [are] aimed at modernising and simplifying regulatory arrangements for SVFs in a way that is conducive to innovation, while maintaining appropriate consumer protections”.
Reserve Bank Sees No ‘Policy Case’ for Digital Aussie Dollar Just Yet
Despite prior reservations about CBDCs, research has continued to consider if and how this technology can be applied for the benefit of Australian citizens and industry alike.
The RBA has stated that “[it] does not consider that a policy case has yet emerged for issuing a CBDC”. Nevertheless, it has continued research into possible use cases for a retail CBDC, or a wholesale CBDC for cross-border payments between other central banks. There is also no evidence indicating that a CBDC will even make use of Distributed Ledger Technology (DLT).
The new form of money will be a liability of the central bank and, like cash, the unit of account of the CBDC would be the sovereign currency, such as the Australian dollar. It would be convertible at a one to one with other forms of money, and would likely also be specified to serve as legal tender.
DLT-Based Proof of Concept is in Development
The work currently taking place in the RBA’s in-house Innovation Lab concerning Distributed Ledger Technology is an interbank payment system that began development in 2019. This project is close to finalisation and has included various external parties to extend the proof of concept in numerous ways.
The project explores the implications of delivery-versus-payment settlement on a DLT platform as well as other programmability features of tokenised CBDC and financial assets.
Reserve Bank of Australia
According to the submission, a report will be published soon regarding the outcomes of the project tests. The only fully live CBDC is the ‘Sand Dollar’ issued by the central bank of the Bahamas; other countries are still in development and testing phases.
Real-Time Trading Between Individuals or Organisations
The RBA is part of the Digital Finance Cooperative Research Centre (CRC) team, bringing together many academics from 20 different entities in finance to “develop and exploit the opportunities arising from the digitisation of assets so they can be traded and exchanged directly and in real time between any individual[s] or organisation[s]”.
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