Reserve Bank of Australia is looking at ‘Central Bank Digital Currency’ as a complement to existing forms of money. CBDC would be a new digital form of money issued by the Reserve Bank like a digital version of banknotes that is essentially universally accessible.
The political decision has not been made to implement Digital Currency but given that governments and the central / reserve banks around the world have invested millions of dollars and resources to investigating the possibilities and benefits, it will be a topic for continued discussion in the near future.
UPDATE: Reserve Bank and Digital Finance CRC Complete CBDC Research Project
23 Aug 2023 – The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) released a report on the findings from a joint research project involving industry that explored potential use cases for a central bank digital currency (CBDC) in Australia.
‘The project yielded valuable insights into how a CBDC, alongside other innovations in digital money, could potentially unlock benefits for the Australian financial system and the wider economy.
It also highlighted the benefits of close engagement between industry and policymakers in exploring the opportunities and challenges associated with innovations in digital money. 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.
Alongside our ongoing work on cross border payments, this will include deepening our understanding of the role that tokenised asset markets and programmable payments could have in the Australian economy.’
Brad Jones, Assistant Governor (Financial System) at the RBA said
UPDATE: Payments System Board Update: August 2023 Meeting
International and domestic work on central bank digital currency (CBDC). Members discussed the ongoing research on CBDC, including the Bank’s CBDC pilot project with the Digital Finance Cooperative Research Centre (DFCRC), which concluded in late July.
The project explored use cases that could be supported by the issuance of a CBDC in Australia. The Bank and the DFCRC will publish a report on the project in late August.
The Board also met with firms in the digital asset industry to discuss issues relating to the future of money in Australia, including the opportunities arising from asset tokenisation and the potential role of CBDC in the digital economy.
Reserve Bank and Digital Finance Cooperative Research Centre Explore Possibilities for CBDC
The Reserve Bank is collaborating with the Digital Finance Cooperative Research Centre (DFCRC) to explore possibilities for a central bank digital currency (CBDC) in Australia.
Considerable research has been already undertaken by central banks, including the Reserve Bank, into the feasibility and possible technical design of CBDC, in particular exploring the potential use of new technologies such as distributed ledger technology.
A question that has received less attention to date, especially 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 introducing one.
‘CBDC is no longer a question of technological feasibility. The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.’
Dr Andreas Furche, CEO of the DFCRC, said
What is Central Bank Digital Currency?
The Reserve Bank currently issues two forms of money:
- physical money in the form of banknotes, which can be used by households and businesses to make payments, and
- digital money in the form of balances held in accounts that commercial banks and some other types of financial institutions can hold at the Reserve Bank to settle payment obligations between each other.
A CBDC would be a new digital form of money issued by the Reserve Bank. It could be designed for retail (or general purpose) use, which would be like a digital version of banknotes that is essentially universally accessible, or for wholesale use, where it is accessible only to a more limited range of wholesale market participants for use in wholesale payment and settlement systems.
A CBDC could potentially support a number of the Bank’s policy objectives, including safeguarding public trust in money and promoting efficiency, safety, resilience and innovation in payment systems and financial market infrastructures.
RBA looks at how to implement CBDC
The RBA and DFCRC are focusing on innovative use cases and business models that could be supported by the issuance of a CBDC. The project will also be an opportunity to further understanding of some of the technological, legal and regulatory considerations associated with a CBDC.
The project, which is expected to take about a year to complete, will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time and is intended to involve a pilot CBDC that is a real claim on the Reserve Bank.
The following use cases and their providers have been invited to participate in the pilot to demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses. Brief profiles of the use cases can be found here <https://dfcrc.com.au/cbdc/>.
| No. | Use Case Description | Use Case Lead / Consortium Partners |
|---|---|---|
| 1. | Offline Payments | ANZ |
| 2. | Nature-based Asset Trading | ANZ / Commonwealth Bank |
| 3. | SuperStream Payments | ANZ / Oban |
| 4. | Corporate Bond Settlement | Australian Bonds Exchange |
| 5. | Tokenised FX Settlement | Canvas Digital |
| 6. | GST Automation | Commonwealth Bank / Intuit |
| 7. | CBDC Custodial Models | digi.cash |
| 8. | Livestock Auction | Fame Capital |
| 9. | High Quality Liquid Assets Securities Trading | Imperium Markets |
| 10. | Interoperable CBDC for trusted Web3 commerce | Mastercard / Cuscal |
| 11. | Funds Custody | Monoova |
| 12. | Construction Payments | NotCentralised |
| 13. | Tokenised Bills | Unizon |
| 14. | CBDC Distribution | ANZ |
White Paper on CBDC Research Project
The DFCRC and the Reserve Bank have released a White Paper ‘Australian CBDC Pilot for Digital Finance Innovation’, that explains the objectives and approach of the project in more detail, including the design of the pilot CBDC that will be utilised by industry participants to explore use cases for a CBDC.
‘Australian CBDC Pilot for Digital Finance Innovation’ 821KB (White Paper)
Interested industry participants are invited to make submissions on CBDC use cases that have the potential to deliver benefits to the functioning of the Australian economy and financial system. Participants can also express interest in operating their use case in a pilot project to test and demonstrate the value proposition.
For more information on how to participate in the project, please visit: https://dfcrc.com.au/cbdc
The Reserve Bank’s discussion page on Digital Currency is here
The Bank and the DFCRC will select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC. A report on the findings from the project, including an assessment of the various use cases developed, will be published at the conclusion. The findings will contribute to ongoing research into the desirability and feasibility of a CBDC in Australia.
The Australian Treasury is participating as a member of the steering committee for the project, as part of its joint work with the Reserve Bank on exploring the viability of a CBDC in Australia.
‘This project is an important next step in our research on CBDC. We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia’
said Michele Bullock, Deputy Governor of the Reserve Bank.
Digital Finance Cooperative Research Centre (DFCRC)
The DFCRC is a 10-year, $180 million research program funded by industry partners, universities and the Australian Government, through the Cooperative Research Centres Program.
The DFCRC’s mission is to bring together stakeholders in the finance industry, academia and regulatory sectors to develop and harness the opportunities arising from the next transformation of financial markets – the digitisation of assets that can be traded and exchanged directly and in real-time on digital platforms.
The Reserve Bank is an industry partner of the DFCRC, and is using its involvement in the DFCRC to support work on its strategic focus area on supporting the evolution of payments, including through research on CBDC.
Project Atom
A collaborative project undertaken in 2020–2021 between the Reserve Bank, Commonwealth Bank of Australia, National Australia Bank, Perpetual and ConsenSys, with additional input from King & Wood Mallesons. The project involved the development of a proof of concept for the issuance of a tokenised form of CBDC that could be used by wholesale market participants for the funding, settlement and repayment of a tokenised syndicated loan on an Ethereum-based DLT platform.
Project Atom report 780KB
Project Dunbar
A collaborative project undertaken in 2021–2022 between the BIS Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore and the South African Reserve Bank. The project explored whether using a shared DLT platform for issuing multiple wholesale CBDCs could improve the efficiency, speed and transparency of cross-border payments.
Project Dunbar report 4.7MB
Other publications
Payments: The Future? – Online – Philip Lowe, Governor – 9 December 2021
The Future of Payments: Cryptocurrencies, Stablecoins or Central Bank Digital Currencies? – Online – Tony Richards, Head of Payments Policy – 18 November 2021
Retail Central Bank Digital Currency: Design Considerations and Rationales – Online – Tony Richards, Head of Payments Policy – 14 October 2020
Retail Central Bank Digital Currency: Design Considerations, Rationales and Implications – Tony Richards, Chris Thompson and Cameron Dark, 17 September 2020
An eAUD? – Sydney – Philip Lowe, Governor, 13 December 2017
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