The Reserve Bank of Australia (RBA) has partnered with a few other agencies to explore the possible role of a central bank digital currency (CBDC) in the Australian payments system

The RBA announced earlier today that it would be working with Commonwealth, National Australia Bank, Perpetual and ConsenSys to explore the potential wholesome use of a central bank digital currency in its payment system.

The Australian central bank revealed that it would be researching the deployment and use of CBDC on distributed ledger technology (DLT) and evaluate the future roles it has in the Australian economy. According to the announcement, the project will focus on developing a proof-of-concept (POC) to issue a tokenised form of the CBDC. Wholesale market participants will use the CBDC for funding, settlement and repayment of a tokenised syndicated loan, which would take place on an Ethereum-based DLT platform.

“The POC will be used to explore the implications of ‘atomic’ delivery – versus – payment settlement on a DLT platform as well as other potential programmability and automation features of tokenised CBDC and financial assets”, the post added.

RBA Assistant Governor (Financial System) Michele Bullock added that the bank would use the project to look at how a CBDC performs in wholesale financial market transactions. The project will focus on understanding the efficiency, risk management and innovation of a CBDC. Bullock added that although the case for using a CBDC in the financial markets is yet to be ascertained, the RBA is glad to be working with the industry experts to look at the possible role of the digital currency in the Australian payment system.

The project is set to be completed towards the end of the year, and a report will be issued on the project in the first half of 2021, the central bank added.

The Reserve Bank of Australia continues to show a strong interest in researching CBDCs. In October, the bank revealed that it would continue to consider the case for a central bank digital currency. It will look at how it might be designed, the perks, policy conditions and the various scenarios where a significant demand for a CBDC might emerge.

Several central banks around the world are currently exploring CBDCs and their possible economic impacts. The rise of cryptocurrencies and stablecoins are key behind central banks considering issuing digital currencies.