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Reserve Bank of Australia considers wholesale digital dollar


forkast.news 26 November 2021 07:05, UTC
Reading time: ~2 m

Interest in cryptocurrency is being driven in part by ultra-low interest rates, Reserve Bank of Australia assistant governor Michele Bullock has said, while indicating the RBA is considering the creation of a central bank digital currency (CBDC) for use in wholesale markets, according to the Australian Financial Review.

Fast facts

  • Speaking at a Women in Payments event earlier this week, Bullock said CBDCs could reduce the cost of cross-border payments, and that institutional interest in the technology is growing, driven by the declining use of bank notes and consumer-led innovation as they search for alternative financial products to earn them higher yield. “It started with Bitcoin, but I think something behind this is this really low-interest-rate environment we have been in since the global finance crisis. People are looking for ways to earn, basically,” she said.
  • The RBA is already part of an international group of central banks, as well as the Bank for International Settlements, participating in Project Dunbar, a wholesale CBDC pilot project aimed at reducing cross-border payments between multiple CBDCs. Australia joins Malaysia, Singapore and South Africa in the group which is collaborating to develop technical prototypes on different distributed ledger technology platforms and study various governance and operating designs that will allow the sharing of different CBDC infrastructures.
  • Locally, the RBA has also been working with National Australia Bank and Commonwealth Bank on a project that allows for an asset to be transferred to a buyer at the exact moment the payment is made in a concept called “atomic settlement.” The aptly named Project Atom was announced late last year and uses an RBA-back currency to reduce the risk and costs involved in wholesale transactions.
  • “It is in the wholesale space this is, at the moment, of most importance. The concept of being able to have atomic settlement and program the way things will happen are important in those markets,” Bullock said at the event. “I am not as convinced it is so important in the retail space.”

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