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Australia Central Bank to Focus on Wholesale Digital Currency Rather Than Retail

By Swati Pandey
A person enters the Reserve Bank of Australia (RBA) building in Sydney, Australia, on Monday, Feb. 6, 2023. Australia's central bank is all but certain to increase interest rates at its first meeting of the year, with some observers pointing to the risk of a resumption of outsized moves to counter a surprising surge in inflation. Photographer: Brent Lewin/Bloomberg (Brent Lewin/Bloomberg)

(Bloomberg) -- The Reserve Bank of Australia said it will focus on the possible use cases for a wholesale central bank digital currency given the modest likely benefits and potential complications from a retail variant.

A retail CBDC would create “non-trivial challenges” for financial stability and monetary policy implementation, Assistant Governor Brad Jones said in the text of a speech due to be delivered in Melbourne on Wednesday.

As an immediate priority, the central bank will start a new project with industry on wholesale CBDC and tokenized commercial bank deposits, Jones said. A wholesale CBDC “would represent more an evolution than revolution in our monetary arrangements,” he added.

Central banks around the world are assessing blockchain technology, with potential gains in the speed and cost of real-time interbank payments a key area of interest. Some 134 countries and currency unions — representing 98% of global gross domestic product — are exploring a CBDC and three nations have fully launched one, according to the Atlantic Council.

Some critics argue modern digital payments are already efficient and that CBDCs bring potential privacy concerns as transactions can be tracked.

Jones said that if a public policy case were to ever emerge in favor of a retail CBDC, the Australian government would be the ultimate decision authority and it would almost certainly require legislative change. For a wholesale CBDC, the decision making and legislative implications would depend on the new arrangement, Jones added.

The assistant governor laid out a roadmap for a three-year digital money work plan. An assessment of how wholesale digital money and new settlement methods could support tokenized markets runs from this year to the first half of 2025. An evaluation of the merits of, and design issues for, a retail CBDC is due to begin in 2026 and conclude the following year.

The government will publish a joint paper with the RBA on CBDC and the future of digital money later Wednesday. ANZ Group Holdings Ltd. and Commonwealth Bank of Australia Ltd. are among the local institutions that have already participated in pilot CBDC projects.

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