RBA in collaboration to extend -proof-of-concept of its wholesale digital currency

  • By Christine St Anne

Separate to its work on monitoring the case for a retail central bank digital currency, the Reserve Bank is collaborating with external groups on developing a wholesale central bank digital currency.   

Speaking at the UWA Blockchain, Cryptocurrency and Fintech Conference, RBA head of payments Tony Richards said the bank is conducting research on the technological and policy implications of a potential wholesale central bank digital currency.

This currency is being currently tested in the bank's in-house Innovation Lab and is separate to it monitoring the case for a retail CBDC. 

Richards already alluded that the central bank was looking at developing its own digital currency in a parliamentary hearing but on Wednesday, Richards revealed that that the focus will be on a wholesale currency. 

According to Richards, earlier work included the development of a limited proof-of-concept of a DLT-based interbank payment system using a tokenised form of CBDC backed by ESA [exchange-settlement-account] balances.

“Currently, the bank is collaborating with a number of external parties on a project to extend this proof-of-concept to incorporate tokenised financial assets to explore the implications of delivery-versus-payment settlement on a distributed-ledger platform as well as other programmability features of tokenised CBDC and financial assets,” Richards said.

If it turns out there are significant benefits, we will be able to be fast followers, avoiding any early mis-steps and taking full advantage of the inevitable technology learnings

“This is interesting research, and we will be providing further information on it in due course,” he added. 

While a review by the Bank of International Payments revealed that a number of central banks around the world were looking at the viability of a central bank digital currency, particularly for cross-border payments, Australia’s Reserve Bank did not believe there was a public policy case for such a currency.

It was a view, Richards again echoed at the conference. 

“Australian households and businesses have access to payment services that have been upgraded significantly in recent years and meet most of their current needs. 

“It is not obvious that a CBDC would be a solution to any particular problems or that there would currently be significant demand for one.”

However, he added that the RBA has an open mind and will continue to monitor developments in this area. 

“Globally, there are around 180 sovereign currencies. If some jurisdictions do move towards full implementations of CBDC, there will be many central banks like us who will be closely watching their experience. 

“If it turns out there are significant benefits, we will be able to be fast followers, avoiding any early mis-steps and taking full advantage of the inevitable technology learnings.”