The Reserve Bank of Australia plans to release a full public report of its findings and insights from its Proof-of-Concept project for the Central Bank’s Digital Currency (CBDC) mid-year this year.
In cooperation with CBA, NAB, the Perpetual investment group and the US software company ConsenSys, the central bank has developed a proof-of-concept CBDC for wholesale processing on an Ethereum-based DLT (Distributed Ledger Technology) platform.
The evidence aims to identify use cases, including issuing and servicing token loans on the platform.
Payment Policy Assistant Vice President Chris Thompson said at a Blockchain Week 2021 event yesterday that the evidence was “a step forward from the first project the RBA undertook in this area early in the first half of 2019”.
“We had an internal project that was much narrower,” he said.
“We continued research to help us answer … [if] Is there a case for a CBDC in Australia?
“The project is currently underway [and] We want to end it very soon. Hopefully we want to publish a public report on the project in the middle of the year. “
NAB Director Lisa Wade said that by participating in the proof-of-concept, NAB “really wanted to … explore digital finance or programmable finance”.
“We’re very interested in how blockchain can help us in markets where there are a lot of inefficiencies,” she said.
“We wanted to start with a syndicated loan because the transactions are high value and low volume and there are many duplicate processes in the ecosystem, many errors or potential errors and many operational risks.
“We have done a lot of research on this project, looking at the usefulness of the CBDC from a wholesale point of view, only on these large transactions to get rid of these mistakes, save time, and we are very interested in atomic settlement.”
Atomic billing refers to the simultaneous exchange of securities for payment.
Wade said it “became apparent” to NAB in planning the syndicated loan transaction that a tokenized central bank digital currency would be required in order to realize tangible benefits.
“Otherwise, we still had to work with APIs to do billing,” she said.
“Yes we can, and it would still have been great. However, in order to get the operational efficiencies we wanted, we realized we needed that benefit from CDBC.”
While the RBA has not yet changed its stance on CBDC usage in retail, Wade believes that decentralized finance “is the future”, even though it was originally “naysayers” at the beginning of the project.
“I believe if we don’t start building central bank digital currencies, people will just use alternative mechanisms,” she added.