Australian Central Bank to Begin Testing Phase for Potential CBDC

The Reserve Bank of Australia (RBA) is set to join the ranks of central banking institutions to release live central bank digital currencies (CBDCs). With the country looking to improve the efficiency of local and international transactions, it appears to be turning to blockchain technology for some help.  

Earlier this week, the RBA confirmed that it would be collaborating with the Digital Finance Cooperative Research Centre (DFCRC), a financial research institute in the country, on developing a proof of concept for a potential CBDC. According to a joint statement from both agencies, the research will focus on exploring the potential benefits and use cases of a possible CBDC. 

Extensive Potential Use Cases

The statement further explained that the initial research project stage would involve other participants in Australia’s financial space, including banks, online payment service providers, and more. It will begin on March 31 and run through till May 31, with the RBA and the DFCRC releasing a report on their findings a month later. 

Brad Jones, assistant governor for financial systems at the RBA, explained that the research would also serve two significant purposes – contribute to industry learning and add to policymakers’ understanding of the potential benefits of a CBDC. 

Possible use cases to be explored include taxation automation, offline payment processing, and “trusted Web3 commerce.” Additional use cases could include cross-border payment processing, especially with neighboring countries. 

Uncle Sam Lags Again

The new development marks yet another growing shift by countries towards the development of CBDCs. Last month, the Bank of Japan announced that it had made progress with its “digital yen” project and is now ready to begin a pilot program by May. 

A statement by executive director Shinichi Uchida explained that proof of concept testing, which started in 2021, was now over, and the Bank believes that the time has come to proceed with a pilot program. 

Japan is moving on with this project despite private stablecoins being banned in the country. Like Australia, it will also partner with private companies on the project, focusing on examining the technical feasibility of a CBDC ecosystem. 

However, Uchida explained that the pilot program would not include any actual retail transactions and only simulated payments would be processed to maintain a specific level of control over the asset.

Likewise, Russian state-run media house TASS reported last month that the Bank of Russia would be rolling out the first consumer pilot for its CBDC on April 1. According to a statement from the central bank’s deputy governor, Olga Skorobogatova, the rollout will feature 13 local banks and merchants.

The bank official noted that the pilot would feature real consumers and operations in Russia, though both metrics will be limited in number. Banks participating in the pilot program have already made technical confirmations of their readiness to begin testing the digital ruble. The Bank of Russia expects a seamless testing process altogether. 

With all of this, it is interesting that the United States continues to lag in certain respects over CBDC development. Even though there have been scattered attempts by different agencies, including Federal Reserve banks across the country, to run CBDC tests, nothing concrete has come out of the endeavor. 

Recently, Yaya Fanusie, the policy head at the Crypto Council for Innovation, explained to Bloomberg that the United States’ slow start to CBDC development could lead to the country losing its grip on the global financial system. 

Fanusie claimed that many sanctioned countries are looking at CBDCs to circumvent economic and financial sanctions. And with the U.S. not having the right infrastructure to counter this wave, it risks a potential global financial threat. 

Whether the White House and Fed will respond to this remains to be seen. However, if history is any indication, the wait for a digital dollar could be even longer.