The Reserve Bank of Australia (RBA), the country’s de-facto central bank, released the findings of its central bank digital currency (CBDC) pilot project which has the potential “to support increased efficiency and resilience in some areas of the payments system”.
Per a report released on Wednesday, the central bank warned that more research is required to deal with risks including “legal, regulatory, technical and operational considerations.” Given this, the bank noted,
“It is likely that any serious policy consideration of issuing a CBDC in Australia is still some years away.”
The central bank debuted the research project last year in partnership with the Digital Finance Cooperative Research Centre (DFCRC) exploring the potential use cases of a digital Australian dollar (eAUD).
The report noted that “a CBDC could be viewed more as an enabling complement to, rather than substitute for, private sector innovation.”
The research involved a total of 16 use cases submitted by industry participants from March to May this year, which included offline payments by ANZ bank, corporate bond settlement by Australian Bonds Exchange and tokenized FX settlement by Canvas Digital.
The central bank issued a limited-scale ‘pilot’ CBDC in a ring-fenced environment that involved selected industry participants.
“Unlike earlier projects where the CBDC was purely a proof-of-concept, the pilot CBDC was issued as a real legal claim on the RBA.”
The study highlighted four key areas, where a CBDC could potentially deliver benefits to Australian households and businesses.
Brad Jones, RBA assistant governor, said on Wednesday that the insights revealed how a CBDC “could potentially unlock benefits for the Australian financial system and the wider economy.”
“The key findings from the project will help to shape the next phase of the RBA’s research program into the future of money in Australia.”
CBDCs: Power and Pain Points
The research deep-dived into a range of areas, where an eAUD could be used to enhance the functioning of the payments system. Some highlights include facilitating “atomic” settlement for transactions, implementing programmable payments and creating markets for “tokenized” assets.
A number of submissions to the research highlighted the potential for privately issued stablecoins that were fully backed by CBDC.
Pointing out to the risk factors, the central bank and the DFCRC said that the number of issues raised by the project “warrant further consideration in future research.”
The report also revealed the uncertainties over how a digital dollar would fit into the current regulatory framework.
“Some uncertainties related to the bespoke nature of the pilot CBDC itself. For instance, the pilot CBDC was issued as a contractual liability of the RBA rather than under a legislative framework, as would likely be the case if a decision was ever made to issue a CBDC in the future,” it added.