The Reserve Bank of Australia (RBA) has initiated a trial that will last for one full year in order to investigate the business models and novel applications of central bank digital currencies (CBDCs).
The Australian central bank emphasized that the pilot project’s primary objective was to gain a deeper understanding of the regulatory, legal, and technological aspects of CBDCs.
Deputy Governor of the RBA Michele Bullock made the following points:
This study is an essential next step in our research on CBDC, and we are excited to get started on it. We are looking forward to interacting with a broad spectrum of sector participants in order to gain a better understanding of the potential benefits that a CBDC could offer to Australia.
Through its collaboration with the Digital Finance Cooperative Research Centre (DFCRC), the Reserve Bank of Australia (RBA) hopes to get an understanding of the potential for an appeal of establishing a CBDC on Australian soil.
The DFCRC is an industry organization that is supported by the Australian government. It will be tasked with encouraging various parties to build particular CBDC use cases once it has been given the mandate to do so.
The issue of CBDCs by the world’s most powerful banks is continuing to pick up speed. For example, earlier this year the Central Bank of Kenya (CBK) reversed its attitude on crypto assets after soliciting public input regarding the possibility of introducing a CBDC.
The CBK acknowledged that a CBDC provides a number of benefits, including the reduction of expenses associated with international payments and the provision of opportunities for financial inclusion to people who are constrained by their technological expertise or infrastructure.
However, the central bank of Kenya issued a warning about the potential risks that CBDCs could cause. These risks include the possibility that CBDCs could reduce the efficiency of monetary policy by, for example, making it easier for criminals to launder money and placing restrictions on commercial banks.
Because CBDCs are the digital representation of a nation’s fiat currency, that nation’s central bank has direct control over them. Furthermore, CBDCs are supported by national credit and the power of the government.
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