Reserve Bank of Australia:
The Reserve Bank of Australia’s experimental “eAUD” programme is distinctive because it has received various recommendations from the sector rather than any use cases.
More than 140 use case suggestions from the financial sector have been submitted for a Central Bank Digital Currency (CBDC) pilot programme in Australia. Still, the Reserve Bank of Australia (RBA) fears that this might displace the Australian dollar and lead to individuals bypassing traditional banks entirely.
In a speech made public by the RBA on December 8 and scheduled to be delivered by Assistant Governor Brad Jones at a central bank conference on December 8 and December 9 local time, Jones extensively discusses the potential impact of a CBDC on the Australian economy.
Since issuing a white paper on August 9, over 80 financial companies have proposed use cases covering a variety of domains, including e-commerce, offline transactions, and government payments, according to Jones. The RBA has been astonished by the industry interest they have received.
The team developing the “eAUD” pilot programme is deciding which of the suggested use cases to include in the program’s trial phase early next year. The team anticipates publishing a report on the project in the middle of 2023.
Danger of CBDC:
Jones also talks about the possible dangers of an Australian CBDC and highlights the liquidity problems and other problems the banks would experience if a CBDC were their preferred source of assets.
A sufficient number of Australians choosing a CBDC over the Australian dollar could result in banks needing more capital to lend to consumers, making it harder for the RBA to transmit monetary policy, he said. For instance, he noted that deposits from Australian residents, such as savings accounts, now account for over 60% of all funding for their banks.
Jones also says that bank runs could be caused by many Australians pulling out their deposits because they would rather keep their money in a “risk-free” CBDC.
Although the Assistant Governor argues that the central bank has no incentive to use personal information that private companies can use, CBDCs could also offer Australians many benefits, including privacy benefits. They could help protect monetary sovereignty lost if a stablecoin or foreign CBDC fills a domestic void.
In addition to enhanced efficiency and lower costs for end users, he also emphasizes the potential for offline transactions to strengthen the robustness of current payment systems.
As a final comment, Jones said Australians should rest easy knowing that the Reserve Bank will keep printing banknotes “for as long as they place value on them as a public utility.”
However, critics frequently worry that the use of CBDCs will lead to the gradual phasing out of banknotes; this worry is confirmed by Nigeria’s decision to further restrict cash withdrawals on December 6 after the introduction of the eNaira.