The RBA is exploring the development of wholesale CBDC using an “Ethereum-based distributed ledger technology”
The Reserve Bank of Australia (RBA) announced today that the apex financial institution will be collaborating with banks and fintech software companies as a part of the ongoing reserve bank research on wholesale Central Bank Digital Currencies.
Partnering with the Commonwealth Bank, National Australia Bank, the financial services company Perpetual, and software developer, ConsenSys, the RBA will be embarking on a project to explore the utility of an “Ethereum-based distributed ledger technology” in developing a central bank digital currency for the country.
The RBA has explained that it would be researching the design and development of a proof-of-concept for the issuance of a tokenized form of CBDC.
The central bank specifically mentioned the possibility of wholesale market participants using the digital currency for tokenized syndicated loans on a DLT platform and added that the RBA was committed to exploring its implications of delivery-versus-payment security settlements with the cross-chain atomic swap.
“With this project, we are aiming to explore the implications of a CBDC for efficiency, risk management, and innovation in wholesale financial market transactions,” stated Reserve Bank of Australia Assistant Governor Michele Bullock.
“While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system,” he added.
The initiative by the RBA comes amid an about-face by the central bank on its sovereign digital currency policy. The heads of payments policy at the Reserve Bank told on October 14th that the bank would continue its ongoing research efforts towards CBDCs despite the financial institution stating in September that a central bank-issued digital currency does not make a strong policy case.
The country’s efficient, real-time New Payments Platform has been proposed as an alternative to the central bank issuing a virtual currency. The apex bank has further stated that it is willing to provide access to fiat banknotes “for as long as Australians wish to keep using them.”
The central bank said the project will be finished by the end of the year and will issue a report in 2021.
As China’s digital yuan is being tested in various cities throughout the country, central banks from many other nations have reported that they are not concerned about China’s first-mover advantage. “Being right is more important than being first with regards to CBDC,” US Fed Chairman Jerome Powell recently stated.