Australia’s central bank prioritises research on wholesale digital currencies
Governments and regulators are navigating the complex path of digital assets as central bank digital currencies (CBDCs) continue to evolve.
In Australia, the Reserve Bank (RBA) has unveiled its three-year roadmap for digital currencies, dubbed “Project Acacia,” with a focus on wholesale CBDCs over retail versions.
Speaking at a conference in Melbourne, RBA assistant governor Brad Jones (pictured above) outlined the central bank’s priorities, highlighting the benefits of a wholesale CBDC for the Australian economy.
Jones emphasised that technological innovation often reshapes the financial system, citing historical examples like the introduction of paper money and double-entry bookkeeping. He likened the current digital shift to these past innovations, pointing out that the majority of money in circulation is now digital, with cash usage steadily declining.
RBA data show that cash transactions accounted for just 13% of all payments in Australia in 2022, down from 62% in 2010.
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While several central banks globally are exploring CBDCs, the RBA has chosen to prioritise research on wholesale digital currencies rather than retail ones.
“We assess the benefits to the economy as more promising, and the challenges less problematic, for a wholesale CBDC compared to a retail version,” Jones said. “Unlike a retail CBDC that would be issued for use among the public, a wholesale CBDC would represent more an evolution than revolution in our monetary arrangements.”
The RBA plans to conduct detailed research on how digital money, including wholesale CBDCs and tokenised commercial bank deposits, could benefit Australia’s financial system. This research will explore new technologies like “atomic settlement,” which enables instantaneous exchange of assets for payments, potentially reducing risks and increasing efficiency.
Although the RBA has not ruled out the possibility of a retail CBDC in the future, it has deferred further consideration until 2027, stating that the current benefits appear modest compared to the challenges such a system would introduce.
“The potential benefits of a retail CBDC generally appear modest or uncertain at the present time, relative to the challenges it would introduce,” Jones said. “Most of the arguments made internationally in support of a retail CBDCs reflect issues that are either of limited relevance to Australia.”
Jones also acknowledged concerns from critics who argue that retail CBDCs could erode financial privacy and give governments undue control over citizens’ financial activities. These concerns will be further examined in consultations with industry stakeholders.
The RBA, in partnership with the Digital Finance Cooperative Research Centre, plans to release a consultation paper later this month, inviting industry feedback on both wholesale and retail CBDCs. Advisory forums on the issue are scheduled for next year.
“Whatever the shape of future innovation in our financial system, it is reasonable to expect central bank money will continue to serve as the ultimate safe settlement asset, particularly in systemically important markets,” Jones said.
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