Australia Ramps up Its CBDC Pilot Program With First FX Settlement

Jimmy Aki
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World’s smallest continent, Australia, is proceeding with its CBDC program. According to recent reports, the sixth-largest country has recently settled a foreign exchange (FX) transaction using its eAUD currency.

Settlement Sponsored by Layer-2 Blockchain Canvas DeFi

According to an announcement, layer-2 blockchain solution Canvas DeFi was tapped to implement the FX transaction. The FX settlement was facilitated by crypto hedge fund managers DigitalX and TAF Capital, who traded eAUD for the USDC stablecoin.

The transaction was executed using Canvas’ StarkWare zero-knowledge (ZK) roll-up framework called ‘Connect.’ Canvas said that the transaction was done almost instantaneously with little to no delays in between.

Moreover, the eAUD is a form of tokenized FX settlement structure more countries are exploring.

By harnessing the power of blockchain technology, national governments can transform their fiat currencies into virtual assets, facilitating faster and cost-effective cross-border settlement.

These assets are state-owned and controlled, making them legal virtual tenders in supported territories.

Australia’s reported FX settlements in its central bank digital currency (CBDC) pilot program is following the country’s growing interest in the virtual decentralized ledger landscape introduced by cryptocurrencies.

Despite the country not entirely embracing crypto, it began a CBDC live pilot program in early March 2023.

In an announcement published by the Reserve Bank of Australia (RBA) on Twitter, the world’s smallest continent stated that it was looking at exploring the use cases for a national CBDC program.

Canvas DeFi and another blockchain solution provider were handpicked to spearhead the CBDC pilot program.

The CBDC initiative, scheduled to run throughout May, aims to reduce transaction time, fees and provide open access to all residents.

Canvas DeFi’s solution is expected to be permissioned and privacy-focused, allowing Australians to spend eAUD without concerns about their private information leaking.

Additionally, tech companies are expected to integrate fully with the program soon.

Historic Achievement for Government-backed Tokenized Currencies

While interest in CBDCs has continued to grow over the years, Australia’s first FX transaction settlement is one for the ages.

Speaking on the milestone the layer-2 protocol has reached, Canvas DeFi CEO and co-founder David Lavecky stated that it is a historic moment for both the company and the Australian government.

Lavecky also noted that the key takeaways of lower transaction fees, faster finality time, and easy access could spur many governments to begin actively exploring tokenizing their fiat currencies soon, given the challenges inherent in traditional FX and remittance systems.

However, the Australian government is not alone in exploring the CBDC labyrinth, as several nation-states seek to consolidate their power over their citizens.

The Hong Kong Monetary Authority (HKMA) recently launched its pilot CBDC program in the early hours of today.

Nonetheless, not everyone is thrilled with the speed with which more central banks are shifting to this new medium of exchange.

The vast majority of detractors have pointed out the full financial control CBDCs grant to world governments, enabling them to determine the financial well-being of their citizens.

Given that these assets are virtual and cannot be physically handled, detractors state that this could lead to a state-wide crackdown on financial freedom for many.

This sentiment was recently shared by Ron DeSantis, the governor of Florida, who recently outlawed the use of CBDCs.

Given the growing importance of financial autonomy, world governments may be compelled to establish proper regulatory oversight on cryptocurrencies, which many have refused to undertake.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.