Reserve Bank of Australia Looks to Tap Blockchain for a CBDC

The rapid growth of the cryptocurrency industry and the COVID-19-induced crisis have changed the mind of Australia’s Reserve Bank on launching its own CBDC. The bank’s governor Philip Lowe recently confirmed that the organization is conducting research and exploring the benefits of releasing such a product.

RBA to Launch a CBDC?

During the past several years, multiple banks said they were looking into launching a central bank digital currency to reduce the usage of paper money. One study from the Bank of International Settlement concluded that 80% of central banks had such plans.

However, the Reserve Bank of Australia wasn’t one of them as researchers decided that there’s no demand from customers.

Nevertheless, plans change, and a little over a year later, the bank’s governor Philip Lowe confirmed that the entity has set up a research team to explore the benefits.

“Another example where technology and data are opening up new possibilities is in the area of digital currencies. The RBA is conducting research on the technologies and policy implications of a potential wholesale central bank digital currency.”

He went further and predicted that banks could rely on a single digital currency to make sizeable transfers instead of completing transactions in each country’s fiat currency and then converting it.

“This could use distributed ledger technology to support the settlement of transactions in the inter-bank payment system.”

Lowe outlined that a designated team within the bank is already working on such a concept and added that the digital currency should be able to serve the public and the private sectors.

Tapping Ethereum for the CBDC?

A few months before Lowe’s confirmation, CryptoPotato reported that the Australian CBDC could see the light of day on the Ethereum blockchain.

This became possible after a partnership between the RBI, ConsenSys, the financial services company Perpetual, and two other local banks – Commonwealth Bank and National Australia Bank.

The four parties planned to develop a proof of concept for the issuance of a tokenized form of CBDC used by wholesale market participants for the funding, settlement, and repayment of a tokenized syndicated loan on an Ethereum-based DLT platform.

The bank’s assistant governor Michele Bullock said at the time that COVID-19 has changed the RBI’s perspective on the matter and vowed to be prepared once the demand arrives.