Key takeaways:
- Australia’s central bank has finished testing a central bank digital currency (CBDC) and found it helpful in four key areas, including facilitating complex payments and asset tokenization.
- Programmability was also noted as a benefit CBDC might provide since it could boost productivity and lower risk in various intricate corporate operations.
Australia’s central bank has finished testing a central bank digital currency (CBDC), looking at possible uses for a digital dollar, and found it helpful in four key areas, including facilitating complex payments and asset tokenization.
On August 23, the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre published a 44-page report summarizing their results. The study also covered some instances when a CBDC wasn’t strictly necessary to realize the intended use case.
The pilot program identified four key areas in which a CBDC could be used to make improvements, one of which was the ability to make “smarter” payments by enabling various intricate payment arrangements not already supported by existing payment systems.
The research also explained how a CBDC might foster innovation in the growing private digital money sectors, assist financial innovation in markets for debt securities, and improve inclusivity and resilience across the board in the larger digital economy.
Various proposals from the 16 companies that participated in the pilot program emphasized the potential advantages of a CBDC in enabling “atomic settlements,” a simultaneous and instantaneous transaction settlement.
Programmability was also noted as a benefit CBDC might provide since it could boost productivity and lower risk in various intricate corporate operations.
The CBDC pilot program was designed as a legitimate legal claim on the RBA rather than a proof-of-concept, leaving participants confused about its legal standing and regulatory handling. From the report:
“Some participants were uncertain if they were providing custody services or dealing in a regulated financial product because of holding or dealing in the pilot CBDC,”
The privacy matter has also remained unsolved for Australia, and lawmakers and citizens worldwide have expressed worry about the potential surveillance implications of CBDCs. The report asserted:
“The design decisions required to effectively support the variety of needs for privacy and data sharing are challenging, and the technologies to implement those requirements on a single CBDC platform are also complex, warranting further research,”
Despite highlighting the situations in which a CBDC may be helpful, the paper acknowledged that many benefits could be obtained by other means, such as privately issued tokenized bank deposits or asset-backed stablecoins. It was unclear whether CBDC was the only factor necessary to get the expected economic results.
The analysis concluded that further research was needed to fully explore the potential advantages, even though implementing a CBDC might boost efficiency and resilience in some components of the Australian payments ecosystem.
