Australia’s Central Bank Announces Digital Currency Pilot

In August 2022, the Reserve Bank of Australia (RBA) announced its plan to examine the potential economic benefits of introducing a central bank digital currency (CBDC).

In a statement to the media on Tuesday 9th August 2022 the RBA outlined that would carry out a year-long pilot project to explore “innovative use cases and business models” for a CBDC and gain a better understanding of technological, legal and regulatory considerations.

The RBA has revealed that to undertake the process the central bank will partner with the Digital Finance Cooperative Research Centre (DFCRC), a government-backed industry group, for the project, which will invite industry players to develop “specific use cases” that illustrate how a CBDC could provide innovative payment and settlement services to households and businesses.

The result of the pilot will inform ongoing research into the desirability and feasibility of a CBDC in Australia, outlined the RBA.

“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,” says RBA Deputy Governor Michele Bullock.

About 100 countries are considering rolling out CBDCs,  according to the International Monetary Fund, with a number of countries including the Bahamas and China already distributing their own digital currencies among their citizens.

CBDC proponents believe that the nascent technology will enable for faster and cheaper transactions, promote financial inclusion, and give central banks greater flexibility in monetary policy.

While sharing some similarities with cryptocurrencies, CBDCs differ from digital tokens like Bitcoin as they are controlled by a central authority.

Cryptocurrencies operate on peer-to-peer networks known as blockchains, which are decentralised so that no single person or group exercises control.

The Australian Government Has Announced a World First Review into Cryptocurrency

In other crypto related news, also in August 2022, it was announced by the federal government that Australia will become the first country in the world to “token map” the crypto assets sector as the government aims to protect investors amid an onslaught of advertising.

The Australian has revealed that it will undertake a fresh at regulating the crypto industry in consultation with stakeholders on a framework.

Federal Treasurer Jim Chalmers said that the purpose of the review was to enable “consumers to participate in the market while also better protecting them”.

“As it stands, the crypto sector is largely unregulated, and we need to do some work to get the balance right so we can embrace new and innovative technologies while safeguarding consumers,” says Federal Treasurer Jim Chalmers.

“With the increasingly widespread proliferation of crypto assets- to the extent that crypto advertisements can be seen plastered all over big sporting events – we need to make sure customers engaging with crypto are adequately informed and protected,” continued Jim Chalmers.
The Australian Government has labelled the announcement as a world first, Treasury will “token map” the Australian crypto market.

Token mapping is the process of determining the characteristics of all digital tokens available in the country from Bitcoin to Dogecoin.

It will be part of an audit of the crypto ecosystem, which the tax office says more than one million taxpayers have interacted with since 2018.

“The aim will be to identify notable gaps in the regulatory framework, progress work on a licensing framework, review innovative organisational structures, look at custody obligations for third party custodians of crypto assets and provide additional consumer safeguards,” says Jim Chalmers.

Furthermore, in early August the Reserve Bank announced it would trial a digital currency in a “ring fenced” pilot.

Dr. Chalmers concludes that a public consultation paper on ‘token mapping’ will be released in the very near future.

Australia’s Central Bank Announces Digital Currency Pilot <br>