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The Reserve Bank of Australia (RBA) has announced a one-year research program into the pros and cons of a central bank digital currency (CBDC).
The RBA announced that it will partner with the Digital Finance Cooperative Research Center (DFCRC), an industry player with roots in the sector, to assist in the launch of a CBDC.
To achieve this, the RBA will conduct a research program with the DFCRC that will run for 12 months. The joint effort places a keen focus on the economic benefits of launching a digital currency while considering the potential downsides of the move.
“This project is an important next step in our research on CBDC,” said Michele Bullock, RBA Deputy Governor. “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.”
All about the use cases
For Australia’s central bank, the research program will also give significant prominence to the use case scenarios of a digital currency. During the lifespan of the program, interested industry participants can recommend, or even develop, specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses.
The RBA and the DFCRC have the discretion to select the use cases that will participate in the pilot. The Australian Treasury will also play a role as a member of the steering committee based on its previous research into the possibility of a CBDC.
“A CBDC is no longer a question of technological feasibility,” said Andreas Furche, CEO of the DFCRC. “The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximize those benefits.”
CBDC use on the rise
Central banks around the world have quickened their pace in the development of a digital version of their local currencies. At the last count, over 100 countries have made significant steps to create their CBDC while Nigeria and the Bahamas are among the pioneering countries.
The arguments for their creation according to the International Monetary Fund (IMF) lies in their perceived potential to foster financial inclusion, and allow for cheaper transactions.
On the flip side, concerns over privacy issues have blighted some CBDCs with China being forced to issue a statement saying its digital yuan will protect the privacy of users.