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The Reserve Bank of Australia (RBA) has announced a strategic focus on launching a wholesale Central Bank Digital Currency (CBDC) over the next three years, moving away from the idea of a retail CBDC. In a speech delivered by RBA Assistant Governor Brad Jones at the Intersekt Fintech Conference in Melbourne on September 18, the central bank outlined its roadmap for wholesale digital money and infrastructure development.
Jones emphasized that the benefits of a retail CBDC for Australia appear to be limited or uncertain. “I can confirm that the RBA is making a strategic commitment to prioritize its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC,” he stated.
The RBA’s research found that a retail CBDC would provide minimal innovation for public use in Australia, while a wholesale CBDC could offer several advantages. These include reducing counterparty and operational risks, enhancing transparency and auditability, improving liquidity and transaction processing capabilities, and lowering intermediary and compliance costs. These benefits are seen as highly valuable for both commercial and central banks.
Jones also noted that a retail CBDC would come with its own set of challenges, such as the potential for higher borrowing costs, an increased risk of bank runs, and complications in implementing effective monetary policies. As a result, the RBA believes the focus should remain on the wholesale sector, where the benefits are clearer and more substantial.
The central bank’s immediate priority is to launch the public phase of “Project Acacia,” which will explore the potential of a wholesale CBDC and tokenized commercial bank deposits. Project Acacia aims to build on the RBA’s previous research into CBDCs and investigate possible cross-border applications with other regional central banks.
As part of this effort, the RBA plans to establish industry and academic advisory forums on CBDCs, support reforms in regulatory sandboxes to encourage financial innovation, and engage with the public on the potential role of a retail CBDC.
Jones highlighted the RBA’s ongoing research into asset tokenization and the use of blockchain and smart contract technology in central bank operations. “The programmability of tokens via smart contracts, and the ability to free up collateral and reduce counterparty risk by atomically exchanging money and assets on the same ledger, have been of particular interest in experimental research,” he explained.
According to the Atlantic Council, 134 countries, accounting for 98% of global GDP, are currently exploring CBDCs. Of these, 66 countries are in advanced stages of development, either in exploration, pilot programs, or launch phases. This highlights the global momentum behind central bank digital currencies, as the RBA embarks on its own journey towards enhancing financial infrastructure through a wholesale CBDC.
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