Today, the Reserve Bank of Australia (RBA) announced an upcoming pilot program for its central bank digital currency (CBDC), the eAUD. The RBA along with the Digital Finance Cooperative Research Centre (DFCRC) has invited 14 companies from the traditional finance and digital asset industry to work on this project, and on the study that will follow. This is a big step for Australia - it could bring digital currencies and their varied advantages into the country’s economy and to the masses.
According to the joint statement by the RBA and the DFCRC, the 14 companies that will be involved in this pilot include “smaller FinTechs to large financial institutions.” Some of these companies are Mastercard, The Commonwealth Bank, Oban, ANZ, etc. Moreover, this pilot program will only focus on 14 specific use cases for the e-AUD, including offline payments, tokenized forex settlements, construction payments, and natured-based asset trading.
The research project for the e-AUD was launched in August 2022. It invited financial entities to provide potential use cases for the project. Over the next few months, the RBA received several potential uses, from which it has chosen the current 14 use cases for its CBDC pilot program. The e-AUD’s participating companies have been assigned these use cases based on the area of speciality.
For instance, The Australia and New Zealand Banking Group Limited (ANZ) will look into offline payments. A project description by ANZ submitted to the DFCRC indicates the use of smart cards that can be loaded with funds to carry out offline CBDC payments.
Another interesting use case, tokenised forex settlement, will be covered by Canvas Digital, a layer-2 network that specializes in the transfer, trade and investment of digital assets. According to the project description submitted to DFCRC, Canvas will facilitate the trade of e-AUD for foreign currency stablecoins. This will allow for quick and secure exchange of AUD for foreign currency. Traditionally, this process could take days and also cost you up to 5 percent of the remittance amount, according to RBA’s Assistant Governor Brad Jones.
Australia’s CBDC ambitions began in 2020, when the RBA announced a partnership with ConsenSys, a blockchain-based financial infrastructure company established by Joseph Lubin, one of the co-founders of Ethereum. The goal of this partnership was to explore a wholesale form of central bank digital currency (CBDC). However, over the years, Australia’s CBDC endeavour has gradually moved towards business and household use cases.
However, instead of being developed as a widespread substitute for fiat currency, the e-AUD will operate in a ring-fenced environment. This is why it will only be used for certain pre-decided use cases. Such an approach will separate the country’s fiat currency from the CBDC, which could help secure one from the other in case of a breach.
The initial whitepaper for the e-AUD was released in September 2022. According to this document, the CBDC, or at least the research findings, are expected to be completed by mid-2023.
The RBA’s announcement comes hot on the heels of several other nations announcing their CBDC pilot programs. For instance, Japan, Russia, Ukraine and Laos have all announced their CBDC pilot programs in the last couple of months. In all, 11 countries have already launched their CBDCs, with 18 others currently in the pilot phase, as per data from the Atlantic Council. As such, the global CBDC race is indeed hotting up, and Australia hopping onto the bandwagon is another indicators of this.
(Edited by : Anushka Sharma)
