Australia has become the latest country to commence a Central Bank Digital Currency Program. According to the South China Post, the project is a collaborative effort between the Reserve Bank of Australia (RBA) and the Treasury.
The Digital Finance Cooperative Research Centre (DFCRC) is participating in the project as a technical advisor. The A$180 million government-backed industry group brings together stakeholders from research, fintech, industry, and regulation. The research group explores channels of digitizing assets to promote real-time exchange and transactions between organizations or individuals.
The Project Seeks to Understand CBDCs
The CBDC concept is new to the RBA and the Australian government. The project offers the country a chance to understand the nuances of digitizing the financial industry. The bank will also seek to understand the business models and use cases that CBDCs can be applied.
The project timeline and mission coincide with the recent proposition by a former IMF financial expert, John Kiff. He is advocating for central banks to rethink their CBDC projects and ensure that they develop infrastructure that can be supported on offline channels. These techniques include near-field communication (NFC) connections and exchanging authorization code features through text messages to validate financial transactions, especially at the point of sales in an e-commerce environment. He believes offline CBDC would offer a universal appeal and promote the transition to digital finance.
The Project Runs for a Year
The initial phase of the research will run for a year. It will entail the designing and building of a CBDC prototype that will be operated in a controlled environment for the RBA to monitor its usage. According to Deputy Governor Michele Bullock, the project will invite more industry stakeholders to participate and advise the development team. The bank will release a detailed paper to outline its objectives in the next few months.
The RBA is conscious that Australia has one of the most advanced financial systems in the world that are renowned for their efficiency. Hence the new CBDC has to offer a better alternative to the current offerings to woo users.
At the end of the project, the RBA will publish a comprehensive report with a full assessment of the use cases. The project is expected to pave the way for the Australian Dollar’s digitization.
Digital Assets Are Gaining Prominence
Cryptocurrencies, Non-fungible tokens (NFTs), Stablecoins, and Central Bank Digital Currencies are the major digital assets. Due to the volatile nature of Cryptos in bear markets and the high costs of NFTs, Stablecoins and CBDCs are deemed less volatile. However, CBDCs are backed by central banks and can therefore be deemed a safe haven for storing wealth.
The People’s Bank of China and the Bank of Korea are some of the main central banks developing their CBDCs.