The Reserve Bank of Australia (RBA) has announced it will not prioritise developing a retail central bank digital currency (CBDC) in the near future. Instead, the focus will be on launching a wholesale CBDC, according to a recent statement from RBA Assistant Governor Brad Jones.
Wholesale CBDC to Be the Main Focus
During a speech at the Intersekt Fintech Conference in Melbourne on September 18, Jones outlined the RBA’s three-year roadmap, which centres around wholesale CBDC development.
“The RBA is making a strategic commitment to focus on wholesale digital money and infrastructure, including wholesale CBDC, rather than retail CBDC,” said Jones.
Retail CBDC Offers Limited Benefits
Jones explained that research conducted by the RBA showed that a retail CBDC offers little innovation for public use in Australia. On the other hand, a wholesale CBDC presents significant benefits for both commercial and central banks.
Key advantages of a wholesale CBDC include reducing risks, increasing transparency, improving liquidity, and lowering costs related to intermediaries and compliance.
In contrast, a retail CBDC could lead to challenges, such as higher borrowing costs, an increased risk of bank runs, and difficulties in implementing monetary policies.
Project Acacia to Lead the Way
Jones emphasised that the RBA’s top priority is launching the public phase of Project Acacia. This initiative will explore the use of wholesale CBDC and tokenized commercial bank deposits.
Project Acacia will build on previous research into CBDCs and examine cross-border applications with other central banks in the region. It will also establish advisory forums, support financial innovation, and engage the public on the idea of a retail CBDC.
The RBA is also conducting further research into the potential benefits of asset tokenization. Jones highlighted the importance of blockchain and smart contract technology in the central bank’s operations.
“The programmability of tokens through smart contracts and the ability to reduce counterparty risks by exchanging money and assets on the same ledger are areas of interest in our experimental research,” he added.
