Australian central bank to launch ‘live pilot’ of CBDC in coming months

Australia’s central bank is set to launch a “live pilot” of a central bank digital currency  “in the coming months,” according to a joint statement from the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre, an Australian financial research institute.

The RBA said on March 2 that it was collaborating with the DFCRC on a research project to “explore potential use cases and economic benefits of a central bank digital currency (CBDC) in Australia.”

The RBA said the initial stage of the research project involves the selection of several financial industry participants to demonstrate potential use cases of the CBDC.

Use cases being piloted include offline payments, tax automation and a CBDC for “trusted Web3 commerce,” with participants of the trial ranging from banks — such as Commonwealth Bank and Australia and New Zealand (ANZ) bank — to payment providers such as Mastercard.

Selected CBDC use cases and the providers of each. Source: RBA

Brad Jones, assistant governor for financial systems at the RBA, said, “The pilot and broader research study that will be conducted in parallel will serve two ends – it will contribute to hands-on learning by industry, and it will add to policymakers’ understanding of how a CBDC could potentially benefit the Australian financial system and economy.”

Eli Ben-Sasson, co-founder and President of blockchain scaling technology firm StarkWare sees the pilot program as “an important step in the journey” to incorporate blockchain into traditional finance, adding: 

“What we very much need is a set of use cases that show people new digital currencies aren’t empty hype, but rather can do stuff we all need in our normal lives. The question is how to best do this.”

David Lavecky, the co-founder and CEO of blockchain firm CANVAS — one of the firms selected as a trial participant — told Cointelegraph they were selected to explore the potential benefits of using a CBDC in the context of tokenized foreign exchange (FX) transactions.

Lavecky notes that FX and remittance markets are “enormous,” with trillions of dollars traded daily. “And the surprising part is that it moves on very legacy rails at this slow speed.”

He sees CBDCs and digital currencies as having the potential to move currency much quicker and cheaper than these legacy systems, as well as allowing these markets to operate outside of normal business hours. 

“For example, when you’re sending money to New Zealand from Australia, the cut-off was like 1 or 2 pm. So a lot of that friction and capability gets put away when you start moving into digital currencies and CBDCs.”

While many people object to CBDCs from a privacy standpoint, Lavecky notes that this issue would be one of the factors considered, but highlighted that this project was much more focused on examining potential use cases and deciding if the issuance of a CBDC is worthwhile.

“There’s been no decision made about whether a CBDC would be issued and what technology it would use; this is very much just research around capabilities and what’s possible really. So understanding that privacy is a concern, that’s something there can be solutions put forward to, as part of the pilot.”