RBA Prioritizes Wholesale CBDC, Shifts Focus Away from Retail Version

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The Reserve Bank of Australia (RBA) has confirmed it will not be pursuing a retail central bank digital currency (CBDC) in the near future. Instead, the central bank will channel its resources into developing a wholesale CBDC, according to a speech delivered by Assistant Governor Brad Jones on September 18 at the Intersekt Fintech Conference in Melbourne.

Jones outlined the RBA’s three-year plan, which focuses heavily on the advancement of wholesale digital money and supporting financial infrastructure. “I can confirm that the RBA is making a strategic commitment to prioritize its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC,” Jones stated.

Focus on Wholesale CBDC

The decision to focus on wholesale CBDC comes after extensive research by the RBA, which concluded that a retail version would not deliver significant innovation for public use in Australia.

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On the other hand, a wholesale CBDC offers a range of advantages for both commercial and central banks, including reduced counterparty risks, enhanced liquidity, increased transparency, and the potential for lower operational and compliance costs.

Jones pointed out that the potential benefits of a retail CBDC appeared “modest or uncertain” for the Australian public. He also raised concerns that a retail CBDC could lead to increased borrowing costs, a higher risk of bank runs, and difficulties in implementing monetary policies. These concerns contributed to the RBA’s decision to focus its efforts on wholesale CBDC development.

Project Acacia

The central bank’s most immediate priority, according to Jones, is to launch the public phase of Project Acacia, which will explore the use of wholesale CBDCs and tokenized commercial bank deposits. This initiative will also assess cross-border applications, working in collaboration with other regional central banks.

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Project Acacia is expected to build on previous research and engage with industry stakeholders, academics, and the public to further explore the potential of CBDC in Australia. The RBA also plans to support reforms to regulatory sandboxes to facilitate financial innovation and will continue its research into the role of blockchain and smart contract technology in its financial operations.

Meanwhile, the RBA’s announcement comes amid rising concerns about cryptocurrency-related frauds in Australia. According to the Australian Federal Police (AFP), Australians reported losses of around $122 million in crypto investment scams over the past year.