The Reserve Bank of Australia (RBA) is doing a research on the potential benefits of developing a central bank digital currency (CBDC).
A white paper was released by the monetary authority, which outlined the its goals and also issued invitations to interested parties for participating with proposals and giving suggestions for pilot projects.
Digital Australian dollar
The Australian central bank is looking to explore the use cases for a central bank digital currency (CBDC) and it has decided to collaborate with the Digital Finance Cooperative Research Centre (DFCRC) for this purpose.
This is a research program that receives funding from the financial sector and the government. The two released a white paper this week that was aimed at the digital version of the Australian dollar.
The title of the document reflected that the country is exploring the option of a CBDC for the purpose of digital finance innovation.
It highlights the primary objectives of the initiative and also sheds light on the design of the potential new currency.
The RBA stated that members of the industry had been asked to suggest use cases that could be helpful in improving the functioning of the financial system and economy of Australia.
The monetary policy regulator stated that one of their primary objectives was to explore the business models that could offer their support to a CBDC.
Back in July, they had launched a pilot project for this purpose and it is expected to be completed in the mid of next year.
This will also come in handy for the financial authorities because it would shed light on the legal, technological and regulatory aspects that would be involved if they decide to issue a central bank digital currency (CBDC).
The pilot will also include compelling use cases of the CBDC, such as retail and wholesale because this will help understand the rationale behind issuing one.
The RBA said that a wide range of stakeholders was welcome to participate in the project, which included public sector agencies, fintech firms, financial institutions and tech companies.
As there is a possibility that there will be regulatory implications during the testing of the digital Australian dollar, other regulators will also participate in the project.
These include the financial intelligence agency, the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Securities and Investment Commission (ASIC).
The pilot digital currency was called eAUD in the white paper and the Australian central bank said that it would be denominated in Australian dollars.
It also said that the currency would be its liability and they would cap the amount of coins in circulation, which the RBA will determine.
It would consider the requirements of the chosen use case providers for this purpose. Only the country’s residents and registered entities would be allowed to hold the digital currency and no interest would be paid on the holdings.
Storage of the CBDC would be possible in both custodial and non-custodial wallets. The RBA also added that they do not intend to put an end to paper money.