The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) have released their findings on the implications of a central bank digital currency (CBDC). The report, titled “Assessing the Implications of a Central Bank Digital Currency in Australia,” was published on August 23, 2023.
The report outlines the results of a research project that involved the RBA issuing a pilot CBDC to selected industry participants within a secure environment. This was the first time that a central bank had issued a pilot CBDC to industry participants, and it allowed for a deeper understanding of the legal, regulatory, technical, and operational aspects of CBDC issuance.
- Streamlining payments: CBDCs could be used to facilitate faster, more efficient, and cheaper payments. For example, programmable CBDCs could be used to trigger automatic payments whenever predefined conditions are met.
- Spurring innovation: CBDCs could be used to spur innovation in financial markets and other sectors. For example, CBDCs could be used to tokenize assets, such as securities and carbon credits.
- Reinforcing resilience and inclusivity: CBDCs could be used to reinforce the resilience of the financial system by providing an alternative payment method during times of disruption, such as power or internet outages. CBDCs could also be used to promote financial inclusion by making it easier for people to access financial services.
- However, the report also identified a number of challenges that would need to be addressed before a CBDC could be introduced in Australia. These challenges include:
Legal and regulatory issues: There are a number of legal and regulatory issues that would need to be addressed before a CBDC could be introduced, such as the legal status of CBDCs and the implications for financial stability.
Technical issues: There are a number of technical challenges that would need to be addressed, such as the design of the CBDC system and its integration with existing payment systems.
Operational issues: There are a number of operational challenges that would need to be addressed, such as the distribution and management of CBDCs.
The report concludes that the RBA is committed to continuing its research on CBDCs and will work with industry and other stakeholders to address the challenges identified in the report. The RBA will also continue to monitor the international developments in CBDCs.
The findings of the report are significant for Australia and for the global community. The report provides a comprehensive overview of the potential benefits and challenges of CBDCs, and it will be an important resource for policymakers and other stakeholders as they consider the future of money.
- There is strong interest from industry in the development of tokenized asset markets facilitated by a CBDC.
- CBDCs could serve as a catalyst for private sector innovation, including the development of new forms of privately-issued payment instruments and infrastructure.
- The exploration of CBDCs has also raised a number of questions, highlighting the need for further understanding of a range of legal, regulatory, technical, and operational issues.
The report is a valuable contribution to the ongoing debate on CBDCs and will help to inform the development of policy in Australia and around the world.