An Important Milestone on the Digital Roadmap
August 9, 2022
By James Wall
On Aug 9th the Reserve Bank of Australia ("RBA") announced that it was collaborating with the Digital Finance Cooperative Research Centre ("DFCRC") to launch a trial of CBDC. This is an important milestone on the roadmap of digitising the Australian economy.
Australia is already a high adopter of digital services, with high mobile and internet penetration rates providing a platform for world leading digital offerings in the banking sector. Similar to the receptive market in China, where WePay and Alipay experience had developed extensive market acceptance, the commercial trial of an Australian CBDC should play an important role in developing the real world use cases.
The roll out of CBDC has been slower than many market participants have been expecting. As at June this year there were only three jurisdictions that had deployed CBDC in the real economy. In each case the CBDC solves a real world problem and drove early adoption. For example, the Bahamas was the first country to issue a CBDC in Oct 2020 - the Sand Dollar. This digital currency was viewed as an important initiative to deliver more inclusive banking services to the community where the fragmented nature of the Islands meant 20% of the population did not hold bank accounts.
In countries such as Sweden, China and now Australia, where access to banking services is ubiquitous, the testing of CBDC is more focussed on the real world uses cases and the role that a CBDC can play in increasing the efficiencies and productivity in the local and global economy. The CBDC initiatives are an important element, along with Digital Assets and payment services that combined offer the potential of seamless transfer and settlement of transactions. This extends from simple payments, to more complex trade finance applications, and into the funding of the economy through capital markets.
To quote Dr Andreas Furche, CEO of the DFCRC,
‘CBDC is no longer a question of technological feasibility. The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.'