Australia's central bank has indicated that the issuance of a central bank digital currency (CBDC) is still several years in the future, following the conclusion of a pilot study.
The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre, in a report released this Wednesday, have outlined that their collaborative study has highlighted several legal, regulatory, technical, and operational challenges linked to an Australian central bank digital currency (CBDC). These concerns are considered to require more in-depth investigation in forthcoming research.
As per the report:
“Considering the broader context – where the Australian payments system is currently meeting most of the needs of end users and work on CBDC in advanced economies is generally still in an exploratory stage – it is likely that any serious policy consideration of issuing a CBDC in Australia is still some years away.”
The pilot initiative, intended to collaborate with the industry in exploring potential applications for a CBDC, entailed the RBA releasing a pilot CBDC on a limited scale within a controlled environment for specific industry participants, as outlined in the report. A total of 16 use cases proposed by industry participants were chosen to participate in the pilot, which occurred between March and July of this year.
Additionally, the report stated that:
“Unlike earlier projects where the CBDC was purely a proof-of-concept, the pilot CBDC was issued as a real legal claim on the RBA.”
The study revealed that a CBDC could offer potential advantages to Australian households and businesses. Numerous submissions emphasized the capacity to directly manage and program a tokenized CBDC, enabling a variety of intricate payment arrangements not currently supported by existing payment systems, according to the report. Additionally, the report highlighted significant industry interest in exploring the tokenization of real and financial assets on distributed ledger technology platforms, with CBDCs being employed to settle associated transactions. One particular focal point is the traditional debt securities markets, where settlement durations are typically measured in days, the report continued.
Additionally, the report from the RBA cautioned that certain piloted use cases underscored uncertainties regarding the integration of CBDC and new business models that utilize it within the existing legal and regulatory frameworks.
“For instance, the pilot CBDC was issued as a contractual liability of the RBA rather than under a legislative framework, as would likely be the case if a decision was ever made to issue a CBDC in the future.”
In conclusion, the RBA determined that a CBDC holds the potential to enhance efficiency and resilience in specific aspects of the payments system, but further research is necessary to fully explore its implications.