The Reserve Bank of Australia on Tuesday said it is collaborating with the Digital Finance Cooperative Research Centre (DFCRC) to explore use cases of central bank digital currency (CBDC) in the country.
According to the news release, the project will focus on finding relevant use cases for CBDCs in Australia, a country known for its well-developed payments and settlement system. The study will also explore the economic benefits of introducing CBDCs.
CBDCs are digital tokens issued by the central bank, which represent the country’s fiat currency. Unlike Bitcoin, which exists on the public blockchain, CBDCs exist on the private blockchain.
Collaborating with industry participants
The project will help the central bank understand the legal, technological, and regulatory aspects associated with issuing CBDCs.
It will be a limited-scale pilot study which will involve the development of a pilot CBDC that would operate in a ring-fenced environment for a period of time. Interested business participants will be invited to develop specific use cases around the CBDC that could be used to provide innovative and value-added payment and settlement solutions to businesses and households.
It is expected that the pilot study will run for a year. The findings from the study will contribute to ongoing research into the desirability and feasibility of launching a CBDC in Australia.
“This project is an important next step in our research on CBDC. We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia,” said Michele Bullock, Deputy Governor of the Reserve Bank.
Like Australia, the central banks of other leading economies are planning to introduce CBDCs and are weighing their use cases. The Reserve Bank of India has also announced plans to launch a digital rupee, which it expects to roll out by the end of this year.