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Australia to Test Use Cases for the Digital Australian Dollar

Australia’s central bank has enlisted MasterCard and other companies to help pilot use cases for a digital Australian dollar – the eAUD.

The Reserve Bank of Australia (RBA) has revealed a set of projects and partners to develop use cases for the eAUD, currently in its testing phase.

Last August, the RBA announced it will develop a “limited-scale” pilot to explore use cases and the economic benefits from CBDC, and in September announced that it will begin experiments  in the beginning of 2023, with plans to complete the pilot in mid-2023.

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According to a press release, the pilot explores “innovative use cases” for a CBDC which will operate in a ‘ring-fenced’ environment. A ring-fence environment will separate a portion of a user’s financial assets from the rest, potentially protecting the rest of the assets in the case of a breach.

The set of pilot projects will look into offline payments, bond settlements, securities trading, and more, according to the Australian central bank

In a statement published Thursday morning local time, RBA Assistant Governor Brad Jones said that the digital Australian dollar’s pilot project participants come from a variety of backgrounds in the industry, from “smaller fintechs to large financial institutions.”

“The pilot and broader research study that will be conducted in parallel will serve two ends – it will contribute to hands-on learning by industry, and it will add to policy makers’ understanding of how the digital Australian dollar CBDC could potentially benefit the Australian financial system and economy,” he said.

Partnering with the RBA for these pilot projects include Australia and New Zealand Banking Group Limited (ANZ), Mastercard, Monoova, the Australian Bond Exchange, DigiCash, Commonwealth Bank and others.

One project will also look into issues such as conducting offline transactions using a CBDC, where smart cards containing preloaded funds can help facilitate offline payments,  focusing on a “consumer-to-merchant” scenario.

Another project will investigate the use of the dollar-pegged USDC stablecoin to streamline foreign exchange trades and remittances, focusing on whether international remittances can be conducted at any day or time of the week, while reducing counterparty risk.

In pursuing a CBDC, the RBA is interested in implementing a digital Australian dollar because it can be used in everyday transactions for households and businesses.

“A question that has received less attention to date, especially in countries like Australia that already have relatively modern and well-functioning payment and settlement systems, is the use cases for a CBDC and the potential economic benefits of introducing one,” the central bank said.

Governments around the world are turning to exploring CBDCs as a way to transition to a more digital economy. As CBDCs are issued by a country’s central government, many regulators and lawmakers view the form of digital currency a safer alternative to cryptocurrencies, while still leveraging blockchain technology.

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