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RBA prioritizes wholesale CBDCs to reduce risks, cut costs, and boost liquidity, focusing on institutional markets and financial efficiency.
Key Notes
RBA announces 3-year plan for wholesale CBDC, prioritizing institutional benefits over retail options to reduce risks and costs.Project Acacia aims to strengthen Australia's financial system using tokenized deposits and exploring international applications of blockchain technology.Australia joins 134 countries researching digital currencies, with 66 in advanced stages, focusing on institutional market improvements.The Reserve Bank of Australia (RBA) has announced a three-year plan to create a wholesale central bank digital currency (CBDC). At the Intersekt Fintech Conference in Melbourne on September 18, 2024, Assistant Governor Brad Jones outlined the bank’s priorities. He emphasized the focus on wholesale CBDCs, leaving retail options for future consideration.
“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”, said Brad Jones.
RBA’s Commitment to Wholesale CBDC
Jones confirmed that the RBA is focused on wholesale CBDCs because they offer clear benefits for banks. Unlike retail CBDCs, which offer limited use for the public, wholesale CBDCs aim to lower risks, boost liquidity, and reduce costs tied to compliance and middlemen.
He also pointed out that retail CBDCs come with risks, like making bank runs more likely and increasing borrowing costs. Due to these concerns, the RBA has chosen to prioritize wholesale CBDCs. Their current project, called Project Acacia, aims to strengthen the financial system by using tokenized commercial bank deposits and looking into international uses.
However, Project Acacia isn’t just about local improvements. The initiative includes working with other central banks in the region to advance blockchain and smart contract technologies. Through this effort, the RBA aims to create a more open and effective system for institutional markets. Jones highlighted the potential of smart contracts to transform the exchange of money and assets on a shared platform, a major focus for the RBA’s research team.
Although Jones mentioned that the RBA hasn’t fully ruled out retail CBDCs, the focus remains on wholesale solutions. This focus aligns with the global trend, where 134 countries are researching digital currencies, with 66 already in advanced stages.
What Lies Ahead for CBDC Adoption?
While the RBA is moving forward with plans for wholesale central bank digital currencies, it remains cautious about retail versions. By 2027, the RBA will reconsider retail CBDCs, as any adoption would require new laws.
The bank will continue to seek public input and explore asset tokenization, which are key to this initiative. This careful strategy allows Australia to lead in digital currency innovation while managing potential risks to its financial stability.
The three-year wholesale CBDC project places Australia among the top countries shaping digital currency’s future, particularly for institutional markets and central banking. With this cautious approach, the RBA aims to improve the financial system’s efficiency, potentially paving the way for retail CBDCs down the line.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
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With over 3 years of crypto writing experience, Bena strives to make crypto, blockchain, Web3, and fintech accessible to all. Beyond cryptocurrencies, Bena also enjoys reading books in her spare time.
