In brief

  • Australia's central bank has announced a plan to explore the use of a digital currency.
  • The project is set to be completed by the end of 2020.
  • Australia's plans involve the use of an Ethereum-based platform.

The Reserve Bank of Australia, the country’s central bank, is exploring the use of a central bank digital currency, a digital form of fiat currency issued by the state. The central bank is partnering with Commonwealth Bank, National Australia Bank, and Perpetual and ConsenSys Software on the project. 

Central bank digital currencies have been dominating headlines recently. The European Union is asking the public about a decentralized, digital euro, China recently issued 10 million worth of digital yuan to its citizens, and Jerome Powell has discussed the US digital currency strategy at the IMF. Now, Australia doesn’t want to be left behind. 

“With this project we are aiming to explore the implications of a CBDC for efficiency, risk management and innovation in wholesale market transactions,” said Michele Bullock, assistant governor at the Reserve Bank of Australia, in a prepared statement. 

The current project is set to complete at the end of this year, with the main findings being published in the first half of 2021. 

Looking at the idea of a digital Australian dollar. Image: Shutterstock.

The project will involve developing a proof of concept for a tokenized form of a CBDC. In other words, it will be a digital representation of a real, tradeable asset. It’s envisioned that this CBDC token can be used for funding, settlement and repayment of a tokenized loan on an unnamed Ethereum-based platform.

Despite this development, Australia is yet to commit to a CBDC in the future. “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,” Bullock added. 

And if China is anything to go by, the answer is yes.