According to a central banker, several initiatives are scheduled to be tested early next year. Industry interest in an Australian pilot program for a digital eAUD currency has exceeded expectations.
Brad Jones, Assistant Governor of the Reserve Bank of Australia (RBA), also reaffirmed the bank’s skepticism regarding the use of a retail central bank digital currency (CBDC) in a market with an advanced payments infrastructure.
More than 140 use case proposals from about 80 entities have been submitted to the RBA’s pilot “eAUD” program with the Digital Finance Cooperative Research Centre (DFCRC), according to Jones, exceeding initial expectations.
According to Jones, who is in charge of the RBA’s financial system section, “the use cases range from e-commerce payments to offline payments, government payments, and the trade and settlement of tokenized assets?”
Large banks, consultants, and providers of the infrastructure supporting the financial markets were among the interested parties, as were smaller digital asset companies and fintechs.
Early in the next year, the RBA plans to choose a number of ideas to go to the pilot phase.
Jones did, however, issue a warning that the adoption of a retail CBDC as a substitute for cash would be revolutionary and have costs and risks that had not yet been addressed.
It was unclear what issue a CBDC would be resolving for a nation like Australia, which already has a sophisticated payments infrastructure and easy access to cash, Jones added.
It was more likely that household holdings of eAUD with the RBA would eventually take the place of the deposits held by commercial banks, reducing the latter’s capacity to lend.
He warned that central banks would find themselves drowning with consumer deposits that they don’t require and can’t effectively invest. Meanwhile, commercial banks’ access to capital and credit might be seriously impacted because they rely on deposits to sustain their operations.
Since families might move to CBDC in large numbers by typing a single keystroke if they lost faith in a bank, it may also result in speedier bank runs.
Regarding the establishment of a retail CBDC, Jones stated that “a compelling public interest argument would first need to develop.” Overall, we haven’t seen that argument made in Australia, yet.