The Reserve Bank of Australia will test a digital currency in a “bounded” pilot program as part of a collaborative research project into how it could be used by consumers and businesses that will last about a year.
Australia’s central bank has previously stated its interest in the digital currency, which could be a digital equivalent of the dollar and rival privately minted cryptocurrencies, but the research project announced by the bank on Tuesday with the Center for Digital Finances Cooperative Research would focus on how this type of currency. could really be used.
The RBA is collaborating on a research project into the use of a central bank digital currency. Credit: Louie Douvis
The executive director of the research center, Andreas Furche, whose organization is a product of industry, university and government collaboration, said that a central bank digital currency had already been shown to be technically doable “The key research questions now are what economic benefits a CBDC (central bank digital currency) could enable and how it could be designed to maximize those benefits,” Furche said.
In a press release, the Reserve Bank said previous research by central banks around the world had raised questions such as how the distributed ledger technology that is a hallmark of cryptocurrencies could be used for a currency backed by RBA.
But Michele Bullock, the RBA’s deputy governor, said Tuesday’s draft was the next step in its investigation. “We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits that a CBDC can bring to Australia,” Bullock said.
The project would involve a “closed environment” in which a pilot digital currency would be used that had an actual right to the Reserve Bank. Participants selected by the bank and the research center will develop projects that demonstrate how digital currency could be used to help businesses and households within this framework. A report will be published at the end.
China has explored the use of a digital currency, and the use of e-CNY is gradually expanding. Credit: AP
RBA Governor Philip Lowe previously warned that the risk of a central bank digital currency is that it could lead to bank runs if anxious consumers use it to withdraw wealth from commercial banks and park it with the RBA in a crisis.
Privately minted cryptocurrencies have fared poorly this year, even some intended to be stably pegged to the US dollar.