The Reserve Bank of Australia (RBA) has confirmed it will not be pursuing a retail central bank digital currency (CBDC) for now, focusing instead on a wholesale CBDC initiative over the next three years.
In a speech delivered on September 18 at the Intersekt Fintech Conference in Melbourne, RBA Assistant Governor Brad Jones outlined the central bank’s strategic priorities, emphasizing the benefits of a wholesale CBDC for Australia’s financial system.
Why Wholesale Over Retail CBDC?
Jones explained that the RBA’s research showed limited advantages in developing a retail CBDC for the public. He cited concerns such as higher borrowing costs, increased risk of bank runs, and difficulties with monetary policy as some of the drawbacks of a retail CBDC. As a result, the central bank will prioritize wholesale digital money, focusing on infrastructure development and the integration of wholesale CBDC.
He highlighted several key benefits of a wholesale CBDC, including:
- Reducing counterparty and operational risks
- Improving transparency and auditability
- Enhancing liquidity and transaction capabilities
- Lowering intermediary and compliance costs
These advantages, Jones noted, are particularly valuable for both commercial and central banks, making a wholesale CBDC more promising for Australia’s financial system.
Project Acacia: Exploring Wholesale CBDC and Tokenized Deposits
Jones also announced that the RBA’s primary focus in the coming months will be the public phase of Project Acacia, which aims to investigate the practical uses of a wholesale CBDC and tokenized commercial bank deposits. This initiative builds on previous research into CBDCs and seeks to explore cross-border applications in collaboration with other regional central banks.
Project Acacia will also:
- Establish advisory forums with industry and academic experts on CBDC
- Support reforms to regulatory sandboxes, fostering financial innovation
- Facilitate public engagement regarding the possible future of a retail CBDC
Investigating Asset Tokenization and Blockchain
In addition to the wholesale CBDC, the RBA is exploring the benefits of asset tokenization and blockchain technology. Jones noted the potential of smart contracts, particularly their ability to enhance financial operations by automating processes, freeing up collateral, and reducing counterparty risks. These capabilities are of particular interest as the RBA continues its experimental research into digital currency infrastructure.
The RBA’s decision aligns with global trends in CBDC exploration. According to the Atlantic Council, 134 countries, accounting for 98% of the world’s GDP, are currently researching CBDCs. Of these, 66 countries have moved into advanced stages of development, pilot testing, or launch, showing the global momentum behind digital currencies.
