The Reserve Bank of Australia (RBA) published a whitepaper for its pilot central bank digital currency (CBDC), joining the ranks of countries investigating CBDCs. According to the Atlantic Council CBDC tracker, Australia is one of 97 countries that have either launched or are currently conducting research and development and pilot projects for CBDCs.
The whitepaper was published in collaboration with the Digital Finance Cooperative Research Centre (DFCRC), a $180 million research program funded in part by the Australian government.
According to the whitepaper, the pilot project’s goal is to investigate innovative retail and wholesale use cases, as well as business models that could benefit from a CBDC. The project began in July of this year and is expected to be completed by the middle of 2023.
The DFCRC will provide the CBDC platform, while the RBA will handle the issuance and redemption of the pilot CBDC as well as regulatory oversight. This central platform will be in charge of managing and tracking the pilot CBDC, eAUD.
CBDC use cases will be tested by industry participants, who will be responsible for designing and operating their own technology platforms in order to implement the approved use cases. According to the whitepaper, industry participants will not be permitted to use any “code or smart contracts” on the CBDC platform.
Participants’ platforms will be integrated with the pilot CBDC platform via a privacy gateway. These participants would then provide services that make use of the pilot CBDC via their own platforms. According to the whitepaper, the participants will be responsible for verifying the CBDC end users’ know-your-customer (KYC).
The eAUD platform will be developed and installed on a private, permissioned version of Ethereum. As a result, the RBA will have control over its central ledger. The platform will be accessible only to the selected use case providers and their authorized end users.
The RBA will issue the eAUD, which will have an Australian dollar value. The RBA will not pay interest on eAUD, which can be kept in either non-custodial wallets owned by the user or custodial wallets offered by use case providers.
Providers of use cases are also responsible for ensuring compliance with all regulatory guidelines, as well as the costs of piloting.
The RBA and DFCRC will publish a report on the findings, including an evaluation of the developed use cases, at the end of the pilot project, which is set to end in April 2023.
The pilot project’s primary goal is to identify the various use cases that could benefit from CBDCs as well as the economic benefits of an Australian CBDC. The project will also look into the policy and regulatory issues that come with running a CBDC. The goal is to find a “rationale” for a CBDC. In other words, the project seeks to determine whether the country truly requires a CBDC.
The RBA determined in 2020 that there was no compelling case for issuing a retail CBDC in Australia. However, between 2020 and 2021, the RBA collaborated with the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Perpetual, and ConsenSys on ‘Project Atom.’ The Project Atom proof-of-concept CBDC demonstrated the potential benefits of a wholesale CBDC.