Australia’s central bank announces CBDC project with ConsenSys
Australia’s central bank has partnered with Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), investment group Perpetual, and blockchain firm ConsenSys.
Together, the five entities will research the potential use cases and implications of a central bank digital currency (CBDC) using Ethereum-based distributed ledger technology (DLT).
Ethereum has gas fees – that is, the Ethereum blockchain charges people to transact on it. The Reserve Bank of Australia (RBA) has not explained why it prefers Ethereum, a technology also used heavily in the trade space.
The RBA says the research-based project is part of its ongoing efforts around CBDC. That’s despite the central bank saying just two months earlier that there wasn’t a strong policy case for issuing a CBDC.
This newly announced project will finish before year-end. The bank plans to digest it into a report for issuance next year.
What will the project explore?
As part of the research, the RBA wants to develop a proof-of-concept (POC) for the issuance of a tokenised CBDC for “wholesale market participants”.
It cites a digital currency used for the funding, settlement and repayment of a loan which can also be issued on an Ethereum-based ledger.
“With this project we are aiming to explore the implications of a CBDC for efficiency, risk management and innovation in wholesale financial market transactions,” says the RBA’s assistant governor, Michele Bullock.
“While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system,” he adds.
China steams ahead
Whilst Australia just gets started, China has charged full steam ahead with its CBDC project.
The People’s Bank of China (PBOC) announced at Sibos last month that it has processed more than three million digital yuan transactions since it began piloting its CBDC at the end of last year.
PBOC’s deputy governor, Fan Yifei, says that until “late August”, the bank has processed 3.1 million transactions. The total value of these add up to RMB 1.1 billion ($162 million).
“An aggregate of 113,300 personal digital wallets and 8,859 corporate digital wallets have been opened,” the deputy governor says.
The PBOC is also planning to pilot the digital yuan at the 2022 Winter Olympic Games in Beijing. So far, the bank has completed pilots in Shenzhen, Suzhou, and Xiong’an.
The bank has implemented more than 6,700 pilot use cases. These cover bill payments, catering services, transportation, shopping, and government services. Technologies tested include to pay with digital yuan include barcodes, facial recognition and tap-and-go.
In light of COVID-19, it also launched an e-yuan “red envelope” pilot for medical workers in Luohu, a district of Shenzen. This meant some 5,00 medical and healthcare workers received subsidies in the format of e-yuan red envelopes to spend at designated merchants in Luohu.
China’s progress shows some of the potential use cases Australia may uncover in its own CBDC research project.