The Reserve Bank of Australia (RBA) announced that a wholesale central bank digital currency (CBDC) offers greater benefits to the country’s financial system. The regulator is abandoning plans to introduce a retail digital Australian dollar (eAUD) and launching a three-year program to develop a wholesale CBDC.
The Reserve Bank of Australia concluded that the retail CBDC can’t deliver real innovation for public use in Australia. Therefore, the RBA will focus on developing a wholesale digital currency with a range of benefits to both the central bank and local businesses. This was announced by Brad Jones, Assistant Governor of the RBA, during a speech at the Intersekt conference in Melbourne.
Some of the key benefits of wholesale CBDCs that Jones highlighted in his speech include:
- reduced counterparty risks;
- increased transparency;
- auditability;
- lowered operational risks;
- improved liquidity;
- reduced intermediary costs;
- regulatory compliance.
Besides, the implementation of the wholesale CBDC will enable the RBA to facilitate a more efficient exchange of assets and fiat funds using a single digital platform. Smart contracts and blockchain technologies will greatly simplify and automate complex financial transactions.
Jones said the RBA team prepared a three-year plan to research, develop, and test a wholesale version of the digital Australian dollar (eAUD), which includes the following phases:
- Project Acacia, which will run from H2 2024 to H2 2025. The project will concentrate around evaluating the potential of wholesale CBDCs and tokenized commercial bank deposits in cross-border payments and remittances. A key objective will be to explore ways to optimize the digital currency infrastructure and improve the payment process.
- Advisory forums starting in H1 2025. Forums involving industry and academia will be held to strengthen interaction between CBDC developers and users and to support market adaptation to digital technologies and financial innovation.
- Regulatory sandbox expansion planned for 2025. The RBA plans to work with the Australian government to develop and promote new digital regulatory guidelines for the region.
For the retail eAUD, the RBA intends to conduct a series of public consultations with the community from mid-2025 to gauge demand for the technology. From 2026, the bank plans to return to developing the retail CBDC based on feasibility assessments and lessons learned elsewhere. Jones explained that the bank’s refusal to implement the retail CBDC at this stage is directly related to the complexity of its implementation, as well as the potential for the retail eAUD to increase the cost of borrowing, provoke banking crises, and create difficulties in the adoption of monetary policy.
Australia’s retail CBDC pilot was launched in 2022. It was expected to be completed in early 2023, but the project was extended last March to test a digital government currency together with financial institutions, FinTech companies, and government regulators. The retail CBDC pilot was finally completed in August 2023.
