An Exploration of Use Cases for Central Bank Digital Currency Is Underway at the Reserve Bank of Australia

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The Reserve Bank of Australia (RBA) has recently announced plans to explore the use cases and economic benefits of issuing a Central Bank Digital Currency (CBDC).

In partnership with the Digital Finance Cooperative Research Centre, on 26 September 2022, The Reserve Bank of Australia (RBA) released a white paper defining the objectives of their project.

CBDCs are digital currencies pegged to a country’s official currency and issued by the country’s central bank. CBDCs differ from stablecoins as they are state-issued and operated, backed by the government’s full faith and credit. They offer an alternative to existing payment systems and can function as a secure, convenient, and cost-effective means of payment.

The RBA’s white paper also outlines the potential benefits of issuing a CBDC in Australia, including increased financial system stability, improved access to payment services by low-income individuals and small businesses, greater competition among service providers, and increased efficiency in retail payments. Additionally, a CBDC could provide stronger protections for consumer data.

According to the CBDC Pilot Program summary, “Digicash will trial different custody models of CBDC holdings for online payments. They will pilot non-custodial holdings, custodial with beneficial ownership, and custodial holdings with pooled ownership. This opportunity is focused on informing policy decisions.”

The RBA plans to investigate different use cases for a possible CBDC in Australia over the next two years. This will involve examining the technical aspects of designing such a system and studying the economic implications for users and issuers.

The Reserve Bank of Australia (RBA) is hopeful that CBDC technology can be used to solve existing real-world problems. The RBA engages with Australian regulators and assesses any associated risks to achieve the best possible outcomes.

This will lead to a better understanding of how such a technology could be regulated while informing policy decisions around developing and using innovative business models. Furthermore, this process will enable the RBA to gain insight into how CBDCs could benefit Australians in terms of financial stability and accessibility of payment services.

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