The Reserve Bank of Australia (RBA) announced in a statement on Wednesday that it will prioritize the development of a wholesale central bank digital currency (CBDC) over a retail version.
It is worth noting that a wholesale CBDC is a digital token issued by central banks for use by banks and financial institutions, while a retail version is aimed at consumers and everyday transactions.
“The RBA is making a strategic commitment to prioritise its work agenda on wholesale digital money and infrastructure, including wholesale CBDC,” said Brad Jones, Deputy Governor of the RBA. “We are currently assessing the potential benefits as more promising and the challenges less problematic for wholesale CBDC compared to a retail CBDC,” he added.
Australia has also been exploring wholesale and retail CBDC use cases for several years. However, in the report, the RBA said it was able to identify a “clear public benefit” for a retail CBDC, as citizens are “well served” by the current retail payments system.
“However, the RBA and Treasury remain open to the possibility that this assessment may change over time as the potential benefits and costs become better understood, both internationally and in the domestic context,” the statement said.
It is important to note that according to surveys conducted by the Bank for International Settlements (BIS), dozens of countries have currently been examining the use of CBDCs, including G20 nations.
For reference, among the 86 banks participating in the BIS survey, 94% said they were considering a digital version of their national currencies. This is up from 90% of the 81 respondents in the BIS surveys conducted in 2021.
Australia and the financial world join forces to explore CBDCs
It is important to note that countries around the world have been exploring whether or not to produce a digital currency for years, with China being one of the first to enter the sector. Meanwhile, Nigeria and the Bahamas were among the first countries to issue their own CBDCs.
Australia has also committed to a three-year applied research program on the future of digital money in the nation. Also, next month, the central bank will launch the public phase of “Project Acacia,” which will explore opportunities to improve wholesale markets using central bank money through tokenization and new settlement infrastructure, according to another report on CBDCs published Wednesday by Brad Jones.
“Our most immediate priority is to launch a new project with the industry on wholesale CBDCs and tokenized commercial bank deposits,” Brad Jones said in the statement. “The focus will be on understanding how new accounting arrangements and concepts such as programmability and atomic settlement in tokenized markets could bring benefits to the Australian financial system and the broader economy,” he added.
In addition, the RBA and the Australian Treasury will also undertake some form of public engagement on retail CBDCs in 2025 and will conduct further research and experiments in the coming years. According to Brad Jones, in 2027, the RBA and the Treasury will publish another paper that will examine the merits and potential form of a retail CBDC.
“We don’t have all the answers, so we look forward to collaborating with industry partners who have the ability and desire to innovate with the national interest in mind,” said Brad Jones.
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