The Reserve Bank of Australia (RBA) prioritizes the development of a wholesale CBDC to reduce risks, cut costs and increase liquidation, focusing on institutional markets and financial efficiency.
The Reserve Bank of Australia (RBA) has announced a three-year plan to develop a wholesale central bank digital currency (CBDC). At the Intersekt Financial Technology Conference in Melbourne on September 18, 2024, Deputy Governor Brad Jones outlined the bank’s priorities. He emphasized the focus on developing a wholesale CBDC , leaving retail options for future consideration.
“I can confirm that the RBA is strategically committed to prioritising its agenda on wholesale digital currency and infrastructure – including wholesale CBDC – rather than retail CBDC,” said Brad Jones.
RBA's Commitment to Wholesale CBDC
Jones confirmed that the RBA is focusing on wholesale CBDCs because they offer clear benefits to banks. Unlike retail CBDCs, which are limited to the general public, wholesale CBDCs aim to reduce risk, increase liquidation , and cut costs associated with compliance and intermediaries.
He also pointed out that retail CBDCs pose risks such as increasing the likelihood of a banking crisis and increasing the cost of borrowing. Based on these concerns, the RBA has decided to prioritize wholesale CBDCs. The current project, called Project Acacia, aims to strengthen the financial system through the use of tokenized commercial bank deposits and explore international applications.
Project Acacia is not just about local improvements, however. The initiative involves working with other central banks in the region to leverage blockchain and smart contract technology. Through this effort, the RBA hopes to create a more open and efficient system for institutional markets. Jones highlighted the potential of smart contracts to transform the exchange of currencies and assets on a common platform, which is one of the RBA’s research focuses.
While Jones mentioned that the RBA has not completely ruled out the development of a retail CBDC, the current focus remains on wholesale solutions. This direction is in line with the global trend, where 134 countries are researching digital currencies, of which 66 have reached an advanced stage.
What is the Future of CBDC Adoption?
As the RBA moves forward with plans for a wholesale CBDC, the bank remains cautious about retail versions. By 2027, the RBA will XEM the possibility of developing a retail CBDC, as any adoption would require new regulations.
The Bank will continue to seek public input and explore tokenization, which is essential to this initiative. This cautious strategy allows Australia to lead in digital currency innovation while managing potential risks to its financial stability.
The three-year wholesale CBDC project puts Australia at the forefront of shaping the future of digital currencies, particularly for institutional markets and central banks. With this cautious approach, the RBA hopes to improve the efficiency of the financial system, potentially paving the way for a retail CBDC in the future.
