The Reserve Bank of Australia (RBA) says it's teaming up with a research partner to investigate use cases and possible economic benefits from introducing a central bank digital currency (CBDC) in Australia.
A CBDC is the digital form of a country’s fiat currency. A handful of central banks including those of The Bahamas and Nigeria have already introduced a CBDC. Others, including the People's Bank of China and Sweden's Riksbank, are in the pilot phase. And dozens of other central banks, including the Reserve Bank of New Zealand (RBNZ) are considering introducing a CBDC. RBNZ Director of Money and Cash Ian Woolford spoke in the Of Interest podcast about the RBNZ's plans and thoughts on a CBDC in June.
The RBA says it'll work with the Digital Finance Cooperative Research Centre (DFCRC) researching use cases for a CBDC in Australia.
"Considerable research has been undertaken by central banks, including the Reserve Bank [of Australia], 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," the RBA says.
"The project with the DFCRC will help address this gap by 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 RBA says the project will take about a year. It will involve a pilot CBDC that is a real claim on the RBA.
"Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses. 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 will participate as a member of the steering committee for the project, as part of joint work with the RBA on exploring the viability of a CBDC. The RBA says it'll publish a paper in coming months explaining the objectives and approach of the project in more detail, covering how industry participants will be able to engage.
"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," RBA Deputy Governor Michele Bullock says.
The DFCRC is a 10-year, A$180 million research programme funded by industry partners, universities and the Australian Government, through the Cooperative Research Centres Program.
10 Comments
Markets have been constantly evolving for decades, and just like today, the commercial banks and Central Banks eventually took over.
Financial markets in Australia developed ways to circumvent the regulatory framework. A good example was the formation of the foreign currency hedge market in the mid-1970s, established entirely by private sector market participants, which operated alongside the physical foreign exchange market but was outside the direct control of the authorities. This was a non-deliverable forward market that began as a means of managing exchange rate risk. The market was onshore, with settlement of contracts taking place in Australian dollars. There was no exchange of foreign currency, and so the forward cover was achieved without violation of existing exchange controls. The authorities were aware of the formation of this market, but chose not to interfere with its development.
The case for Matariki accounts for all. Bernard Hickey argues that the Reserve Bank should create accounts for every single resident that can be used to deposit and transact a new central bank digital currrency, a cbdc. This would open the path to occasional helicopter money, or even a permanent universal basic income, a UBI.
https://thekaka.substack.com/p/the-case-for-matariki-accounts-for
Helicopter money is already possible. Digital ledger currency means more monitoring, likely the system is going to be tied to a 'social credit' scheme like in China, i.e. in order to be eligible for government money you will have to show certain compliance behaviors.
Maybe the introduction of digital currencies will face a few problems, see https://www.goldmoney.com/research/designing-a-new-currency-is-impracti…
The government already issues digital currency each and every time that it spends but only the commercial banks get to hold it in their exchange settlement accounts. The banks themselves then create a deposit into the payees account. Only those with an account at the Reserve Bank can trade in this currency and the banks just act as a middle man in the system of government payments.
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