- The Reserve Bank of Australia and DFCRC unveiled findings from a CBDC pilot, emphasizing programmable payments and CBDC as a financial market settlement asset.
- Despite the potential benefits, the pilot highlighted concerns around deploying CBDC on specific platforms and the complexities of smart contract integration.
Unpacking Australia’s CBDC Pilot
In a recent unveiling, the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) shared insights from their central bank digital currency (CBDC) pilot, which explored 16 distinct use cases. Intriguingly, the pilot’s focus wasn’t technical but was aimed at discerning the utility of a CBDC in Australia, a country already boasting a proficient electronic payments system.
One striking revelation was the utility of ‘smarter’ programmable payments and the employment of CBDC as a settlement asset in financial markets. Delving deeper, it became apparent that a CBDC could potentially diminish the necessity for centralized clearing, confining intermediaries primarily to coordinating trades and pairing bids and offers.
Brad Jones, Assistant Governor (Financial System) at the RBA, commented,
“The insights derived from this project will be instrumental in shaping RBA’s ongoing research trajectory about Australia’s monetary future. We’re particularly keen on understanding the potential influence of tokenized asset markets and programmable payments on our economy.”
Graphical data from the pilot delineated five primary advantages of a CBDC: unwavering value, elimination of intermediaries, programmability, instantaneous settlement, and transparency. However, a noteworthy observation was participants’ inclination towards privacy, even if it came at the expense of transparency.
Furthermore, it was observed that stablecoins and tokenized bank deposits could potentially deliver several of the CBDC’s benefits.
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Platform Choices and CBDC Deployment
A pivotal point of discussion revolved around the ideal infrastructure for CBDC deployment. Although the pilot intentionally steered clear of technological intricacies, it highlighted the central bank’s experiment with a private Ethereum blockchain ledger. This ledger, however, wasn’t designed to support smart contracts initiated by end-users.
Given this limitation, the CBDC had to be incorporated into other blockchains to allow for programmability and atomic settlement, a move that roused concerns regarding added intricacies and potential risks.
Another revelation was the necessity for atomic settlements to occur when both the digital asset and currency are housed on an identical platform. If not, a mechanism ensuring seamless interoperability becomes indispensable. As it stands, the existing ‘bridges’ on DLT networks are not fully resilient, but there’s optimism about robust solutions emerging down the line.
It appears that allowing smart contracts to operate directly on a core CBDC ledger might be a remote possibility. Such an action would necessitate meticulous auditing of contracts and could introduce substantial risks.
As discussions around CBDCs continue, other intriguing developments, such as the exploration of CBDC-backed stablecoins and Mastercard’s utilization of eAUD on a public blockchain, hint at the evolving digital financial landscape in Australia.
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