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The Reserve Bank of Australia (RBA) has declared that a wholesale central bank digital currency (CBDC) presents greater advantages for the nation’s financial system. The authority is discontinuing plans for a retail digital Australian dollar (eAUD) and is initiating a three-year initiative to create a wholesale CBDC.
The Reserve Bank of Australia determined that the retail CBDC cannot provide significant innovation for public use in Australia. Consequently, the RBA will concentrate on the development of a wholesale digital currency that offers various benefits to both the central bank and local enterprises. This was stated by Brad Jones, Assistant Governor of the RBA, during his address at the Intersekt conference in Melbourne.
Some of the primary advantages of wholesale CBDCs that Jones emphasized in his address include:
- decreased counterparty risks;
- enhanced transparency;
- auditability;
- reduced operational risks;
- better liquidity;
- lower intermediary costs;
- regulatory compliance.
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Moreover, the introduction of the wholesale CBDC will allow the RBA to promote a more efficient exchange of assets and fiat currencies through a unified digital platform. Smart contracts and blockchain technologies will significantly streamline and automate intricate financial transactions.
Jones mentioned that the RBA team has devised a three-year strategy to research, develop, and test a wholesale variant of the digital Australian dollar (eAUD), which encompasses the following stages:
- Project Acacia, scheduled from H2 2024 to H2 2025. This project will focus on assessing the potential of wholesale CBDCs and tokenized commercial bank deposits in cross-border payments and remittances. A primary goal will be to investigate methods to enhance the digital currency infrastructure and refine the payment process.
- Advisory forums commencing in H1 2025. Forums involving industry and academic participants will be organized to bolster interaction between CBDC developers and users, as well as to facilitate market adaptation to digital technologies and financial innovation.
- Expansion of the regulatory sandbox anticipated for 2025. The RBA intends to collaborate with the Australian government to formulate and promote new digital regulatory frameworks for the region.
Regarding the retail eAUD, the RBA plans to conduct a series of public consultations with the community starting in mid-2025 to assess demand for the technology. From 2026, the bank aims to resume the development of the retail CBDC based on feasibility evaluations and insights gained from other regions. Jones clarified that the bank’s decision to refrain from implementing the retail CBDC at this time is directly linked to the complexities of its execution, as well as the potential for the retail eAUD to elevate borrowing costs, trigger banking crises, and complicate the implementation of monetary policy.
Australia’s retail CBDC pilot was initiated in 2022. It was anticipated to conclude in early 2023, but the project was extended last March to evaluate a digital government currency in collaboration with financial institutions, FinTech companies, and government regulators. The retail CBDC pilot was ultimately completed in August 2023.
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