Australia’s Central Bank Prioritizes Wholesale CBDC Over Retail, Citing Greater Economic Benefits

Australia’s central bank has decided to prioritize the development of a wholesale central bank digital currency (CBDC), citing its greater economic benefits over a retail version.

At a conference, Brad Jones, Assistant Governor at the Reserve Bank of Australia (RBA), announced Project Acacia’s launch. It is a three-year collaboration with the Treasury to explore digital currency.

The project builds on last year’s CBDC pilot. It will focus on improving the efficiency, transparency and wholesale markets’ resilience using tokenized money and new settlement systems. Jones mentioned that future phases might involve working with regional central banks on cross-border applications.

Speech by Brad Jones, Assistant Governor (Financial System), at the Intersekt Conference in Melbourne – 'Financial Innovation and the Future of CBDC in Australia’: https://t.co/zuYTeslJhZ pic.twitter.com/3ndAbgjepq

— Reserve Bank of Australia (@RBAInfo) September 17, 2024

Australia Central Bank to Release CBDC Consultation Paper in October

In October, the RBA and its research partners will release a consultation paper to gather industry feedback.

The policymaker also announced the creation of CBDC advisory forums for industry and academia. These forums will launch in early 2025. They will address both retail and wholesale CBDC issues.

“We have benefited significantly from engagement with industry and the academic community on various CBDC issues over recent years, and we now seek to put more structure around this dialogue,” he said. “These forums would play a similar role to those the RBA has convened in recent years with economists from industry and academia, to hear different views on monetary policy issues.”

RBA to Advance Regulatory Sandbox Reforms for Digital Currencies in 2024

Next year, a third initiative will build on insights from the previous CBDC pilot by advancing regulatory sandbox reforms for financial innovation, including digital currencies and infrastructure. Industry feedback suggests potential improvements to the sandbox, which temporarily allows unlicensed entities to test new financial products.

The Treasury will work with the government to evaluate and possibly implement changes based on an independent review.

Additionally, introducing a retail CBDC for public use could trigger significant political and economic challenges, potentially reshaping Australia’s financial system, the policymaker. The Australian Government would ultimately decide on implementing a retail CBDC, he noted.

Currently, 134 countries, or 98% of the global economy, are exploring CBDCs, according to the Atlantic Council. China’s e-CNY, the world’s largest CBDC pilot, leads the way.

By June 2024, e-CNY transactions reached $986b across 17 regions, impacting sectors like education, healthcare and tourism.