The bank’s internal innovation laboratory examines potential of a Central Bank Currency: the digital Australian dollar.
Ethereum remains one of the most used Blockchain for the development of currencies. This is demonstrated by this information from Australia. The Reserve Bank of this country (RBA) conducts digital currency experiments based on Ethereum and seeks opportunities for third parties to participate in its research.
This news was commented by the ComputerWorld media, highlighting that the Reserve Bank of Australia believes that, although there may be risks associated with a “digital Australian dollar,” it explores whether there is a potential value in the development of a digital currency that can be used by the wholesale participants in the payment sector.
According to the media, the RBA says that there is currently no reason to create a Central Bank Digital Currency (CBDC), a cryptocurrency issued privately, however it can still take advantage of Blockchain for domestic use.
In a presentation (you can download it here in PDF) to a Senate consultation that was addressing the issue, the bank said there may be very little demand among consumers of a CBDC, because the banking system is quite stable in Australia.
But he argues that, in times of uncertainty, such a digital currency could facilitate bank runs, and if it enjoyed widespread adoption, it could mean a drop in bank deposits that could lead to less funds available for domestic and commercial loans.
Digital Australian Dollar
However, despite the previous opinion, the central bank’s internal innovation laboratory is examining the potential of an Australian CBDC, but specifically in the context of wholesale liquidation, according to ComputerWorld.
The work of the RBA laboratory in the area includes the development of a proof of concept of a wholesale settlement system using a CBDC.
According to RBA statements, the laboratory used a private and authorized Ethereum network for the project, pretending to be a central bank that issued tokens to commercial banks, as well as tokens that are exchanged between banks and eventually exchanged with the central bank. That research is expected to continue in 2020, with the RBA potentially with the participation of external partners to participate.
Other Central Bank digital currencies
This is not the first central bank to experiment with the idea of a currency of its own. In fact, recently, the president of the European Central Bank, Christina Lagarde, expressed that the plans to create a digital currency of the central bank are maintained. This, to counteract the use of cash.
China also confirmed in October 2019, that it plans to launch its Central Bank cryptocurrency. It would be called Digital Currency Electronic Payment System (DCEP), or “electronic payment in digital currency”. It would be brought to light this year.