- The RBA confirms no plans for a retail CBDC, focusing instead on wholesale CBDC benefits for the financial sector.
- Wholesale CBDC offers advantages like reduced operational risks, improved liquidity management, and lower intermediary costs.
- Through Project Acacia, the RBA will pilot a wholesale CBDC with tokenized bank deposits, exploring cross-border applications.
The RBA clarified that it has no intention of issuing a retail Central Bank Digital Currency (CBDC) in the near future. Consequently, the central bank will concentrate on the issuance of the wholesale CBDC to examine the advantages of the digital currency in the financial sector.
RBA Assistant Governor Brad Jones presented the three-year vision of the bank at the Intersekt Fintech Conference held on September 18 in Melbourne. The plan focuses on the research of the wholesale CBDCs, which is supported by the RBA’s findings that the retail digital currency has few benefits to the citizens of Australia.
Benefits of Wholesale CBDC
Jones explain that the wholesale asset could have at least four major advantages, especially for financial institutions. These include minimizing operational risks, increasing the transparency of transactions, and improving management of liquidity. Besides, a wholesale form of digital currency could reduce the costs of intermediaries, which is beneficial for banking systems.
The RBA however, has concluded that the potential for a retail Central bank digital currency to offer benefits to the public is ‘modest or uncertain’. Potential issues with a retail version include rising funding costs and the possibility of runs on banks. The design of an appropriate monetary policy framework for a retail CBDC could also be challenging, which is in line with the RBA’s focus on the wholesale option.
The central bank’s current priority is Project Acacia through which it will pilot a Central bank digital currency in combination with tokenized commercial bank deposits. This initiative could extend prior research and address cross-border implementation, possibly engaging other regional banks. Also, Project Acacia intends to involve the industry stakeholders and academics to present forums where advancement will be deliberated on.
Jones also pointed out that the RBA is exploring the possibilities that asset tokenization holds and the application of blockchain and smart contracts in the organization. These are in line with the developed world’s move towards digital currency. According to the Atlantic Council, 134 countries or 98% of the global GDP is considering CBDCs, with 66 countries either in the advanced stages, pilots, or official launches.
Through the proposed wholesale Central bank digital currency, the RBA seeks to improve the effectiveness of the financial system without the complications and risks that arise with a retail CBDC. This approach shows that the bank is being very careful but deliberate in its approach in the dynamic digital currency market.
