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RBA to explore use cases of digital currency

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The central bank will also investigate the economic benefits of a digital currency as part of its new research project.

The Reserve Bank (RBA) has launched a new research project to investigate the use cases for a central bank digital currency (CBDC) in Australia.

Working in collaboration with Digital Finance Cooperative Research Centre (DFCRC), the project will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment and involve a pilot CBDC that is a real claim on the RBA.

The RBA stated that, while it and other central banks had undertaken considerable research on the feasibility and technical design of a CBDC, less attention had been given to the potential use cases and economic benefits.

“The project with the DFCRC will help address this gap by focusing on innovative use cases and business models that could be supported by the issuance of a CBDC,” the RBA said.

“The project will also be an opportunity to further understanding of some of the technological, legal and regulatory considerations associated with a CBDC.”

A paper is set to be published in the coming months that will set out the objectives and approach of the project, which is expected to take about one year to complete. 

Treasury will also participate as a member of the steering committee for the project.

“This project is an important next step in our research on CBDC,” commented RBA deputy governor Michele Bullock.

“We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia.”

As part of the project, industry participants will be invited to develop specific use cases which demonstrate how a CBDC could be used to provide “innovative and value-added payment and settlement services” to Australian households and businesses.

Different use cases will then be included based on their potential to provide insights into the possible benefits of a CBDC as determined by the RBA and the DFCRC.

“CBDC is no longer a question of technological feasibility. The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits,” said DFCRC CEO Dr Andreas Furche.

The RBA said that the project’s findings — which will be published in a report at its conclusion — would contribute to ongoing research into the desirability and feasibility of a CBDC in Australia.

Earlier this year, ANZ became the first Australian bank to issue an Australian dollar stablecoin.