Australia’s potential for adopting a Central Bank Digital Currency (CBDC) appears to be still distant, as indicated by the findings in a conclusive report emanating from pilot initiatives jointly orchestrated by the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre.
The report, unveiled on Wednesday, elaborates on a Central Bank Digital Currency (CBDC) as “a novel digital representation of currency, with its value denominated in the national tender, and issued as a direct liability by the central bank.” Throughout the pilot phase, the Ethereum blockchain technology served as its underlying framework.
While the report contends that “the serious contemplation of launching a CBDC in Australia is likely to remain a matter of years,” it also acknowledges that exploratory efforts are still in motion within advanced economies globally.
“The gamut of concerns identified during the project, coupled with insights derived from earlier research, underscore the necessity for an extended research agenda spanning multiple years,” the report conveys.
In the preceding March, the Reserve Bank of Australia (RBA) took the initiative to introduce CBDC pilot programs in partnership with the Digital Finance Cooperative Research Centre, alongside local fintech companies and banking institutions.
The endeavor consisted of 16 pilot undertakings, initially proposed with over 140 use case submissions. Going beyond mere proof-of-concept, these pilot CBDCs held genuine legal claims against the Reserve Bank of Australia (RBA).
The report underscores the potential of a CBDC to catalyze the emergence of novel privately-issued payment mechanisms and infrastructures, including stablecoins fully collateralized by CBDCs. Therefore, the report underscores that the currency might function as “a supportive supplement to, rather than a substitution for, innovations emerging from the private sector.”
Moreover, the report suggests that the project’s outcomes offer indications that a CBDC could bolster efficiency, robustness, and inclusivity within select aspects of the payments ecosystem.
For instance, ANZ Bank effectively showcased the utilization of the pilot CBDC for offline digital transactions among students conducting purchases at businesses situated within the premises of RMIT University and Southern Cross University.
Additionally, Commonwealth Bank and Intuit presented a Goods and Services Tax (GST) automation system, potentially alleviating compliance burdens on enterprises by streamlining the necessity for quarterly Business Activity Statements. The pilot CBDC automates the calculation and remittance of a GST invoice to a holding account, earmarked for disbursement to the Australian Taxation Office, while any remaining sum is promptly returned to the business entity.
Local fintech entities Unizon and Zerocap effectively demonstrated a tokenized invoice system. Powered by the pilot CBDC, this system facilitated “programmable payments that autonomously divide and distribute corresponding values among multiple recipients upon invoice settlement, effectively mitigating counterparty risk.”
Throughout the course of the project, a series of “legal, regulatory, technical, and operational challenges” surfaced, necessitating further investigation, the report accentuates. This entails a more comprehensive inquiry into the legal foundation of issuance, along with a thorough evaluation of regulatory adaptations required to accommodate emerging business models.
It’s worth noting that the core focus of the projects did not extend to the assessment of CBDC technology or the technical blueprint of a CBDC platform. Consequently, the report outlines a selection of technical aspects that warrant deeper scrutiny, encompassing scalability, security, and resilience.
In a noteworthy development, the federal Treasury and the Reserve Bank of Australia disclosed intentions to release a comprehensive report around mid-2024. This report aims to take stock of the accomplishments in the realm of Central Bank Digital Currencies (CBDC) within Australia up to that point. Furthermore, the forthcoming document will outline a forward-looking strategy and encapsulate the government’s vision for the trajectory of digital currency in the nation.
