The Reserve Bank of Australia (RBA) and the Australian Treasury have published a new paper that delves into the potential introduction of a central bank digital currency (CBDC) in Australia. In light of ongoing shifts in payment behaviours and the emergence of new digital payment technologies, the paper explores whether the existing forms of money adequately serve the digital age, and how future monetary and payment arrangements might adapt to these changes.
Australia, like many advanced economies, has experienced a steady decline in physical cash usage, with card payments—both online and offline—becoming the norm. The RBA and Treasury are now evaluating whether a CBDC could complement the existing monetary landscape and what form it might take. The paper suggests two primary forms of CBDC under consideration: a retail CBDC for use by the general public and a wholesale CBDC for financial institutions.
Retail CBDC: No Immediate Need
The RBA and Treasury currently see no compelling public interest case for issuing a retail CBDC in Australia. They note that Australia already benefits from an efficient, innovative, and secure retail payment system. The paper acknowledges, however, that the situation may evolve as more information becomes available, particularly from other jurisdictions experimenting with retail CBDCs.
The roadmap outlined includes a commitment to exploring retail CBDC further, engaging in structured public consultations beginning in 2025. Through public engagement and academic and industry advisory forums, the RBA and Treasury aim to better understand the potential benefits, costs, and implications of retail CBDCs, including transaction privacy, offline capabilities, and the role of digital state-backed money.
Wholesale CBDC: Tangible Benefits and Focus on Tokenisation
In contrast, the paper highlights that the benefits and potential use cases for a wholesale CBDC are more immediate and tangible. A wholesale CBDC could foster innovation in wholesale markets, particularly in the tokenisation of asset markets, potentially increasing efficiency in asset issuance and trading. It could also reduce settlement risks and reliance on intermediaries.
While Australia already uses exchange settlement account (ESA) balances for wholesale transactions, a wholesale CBDC could offer more advanced functionalities. The paper also explores the possibility of upgrading ESA infrastructure to support tokenised settlements, which might provide a minimally disruptive means to realise these benefits.
Moving Forward: Experimentation and International Engagement
Given the mixed assessment of retail and wholesale CBDCs, the future work of the RBA and Treasury will focus on wholesale CBDC applications. This includes further experimentation, increased engagement with industry and academia, and collaboration with international central banks to explore various approaches for settling tokenised asset transactions using central bank money.
The paper underscores the importance of a multi-faceted work programme over the coming years, with Project Acacia being a central initiative. This project aims to explore how different forms of digital money, including ESAs, wholesale CBDCs, and deposit tokens, could facilitate the settlement of transactions in tokenised asset markets.
Australia’s exploration into CBDCs reflects a cautious yet forward-looking approach, seeking to balance innovation with the existing robust payments infrastructure. While a retail CBDC is not currently seen as a priority, the RBA and Treasury remain open to revisiting this assessment as international developments unfold and further insights are gained through ongoing research and industry engagement.