The Australian Monetary Authority is beginning research into the potential economic benefits of issuing a central bank digital currency. As part of the project, the regulator hopes to identify use cases and intends to develop a small-scale pilot.
The Central Bank of Australia is working on a 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) for the country’s economy. The project, which is expected to last around a year, will be carried out in collaboration with the Digital Finance Cooperative Research Center (DFCRC), an industry group partially funded by the Australian government.
Besides clarifying certain legal, regulatory and technological aspects, the project will also aim to identify innovative use cases for a state-issued digital currency as well as business models that could be supported by a CBDC, disclosed the monetary authority in a press release.
According to a survey conducted by the Bank for International Settlements in 2021, the majority of central banks are exploring the feasibility of CBDCs. While acknowledging progress in this regard, including exploring the potential implementation of technologies such as distributed ledgers, the RBA noted:
One issue that has received less attention to date, particularly in countries like Australia that already have relatively modern and well-functioning payment and settlement systems, is the use cases for a CBDC and the potential economic benefits of its introduction.
Under the initiative, a limited-scale pilot will be developed in a closed environment with a pilot CBDC that is an actual claim on the Reserve Bank, the RBA also revealed, as quoted by Reuters. Interested industry participants will be invited to develop solutions demonstrating how a CBDC could be used to provide new payment and settlement services to households and businesses, the authority added.
A range of use cases will be selected by the RBA and DFCRC and included in the pilot. Their assessment will be provided in a subsequent report. “The findings will contribute to ongoing research into the desirability and feasibility of a CBDC in Australia,” the bank said. Both institutions will be joined by the participating Australian Treasury as a member of the project steering committee.
Reserve Bank of Australia Deputy Governor Michele Bullock described the program as an important next step in central bank digital currency research as the regulator seeks to better understand the potential benefits.
“CBDC is no longer a matter of technological feasibility. The key research questions now are what economic benefits a CBDC might enable and how it could be designed to maximize those benefits,” added Andreas Furche, CEO of DFCRC.
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