RBA prioritises wholesale central bank digital currency

The Reserve Bank and Treasury have started a three-year digital money work plan to look at opportunities to uplift the efficiency, transparency and resilience of wholesale markets through tokenised money and new settlement infrastructure.

RBA assistant governor Brad Jones. Picture: John Appleyard/NCA NewsWire

The Reserve Bank has started a three-year digital money work plan with the Federal Treasury to look at opportunities to uplift the efficiency, transparency and resilience of wholesale markets through tokenised money and new settlement infrastructure.

In a speech at the Intersekt Conference in Melbourne on Wednesday, RBA assistant governor financial markets, Brad Jones said the central bank is leaning more toward a wholesale central bank digital currency as it assesses the future of digital money in Australia but hasn’t ruled out a retail version.

He said the RBA has made a “strategic commitment” to prioritise its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC.

“At the present time, we assess the benefits to the economy as more promising, and the challenges less problematic, for a wholesale CBDC compared to a retail version,” Mr Jones said.

“Our assessment is that the potential benefits of a retail CBDC generally appear modest or uncertain at the present time, relative to the challenges it would introduce.”

“Given the potential benefits of a retail CBDC in Australia appear modest at the present time, and a retail CBDC would create nontrivial challenges for financial stability and monetary policy implementation, we are yet to see a strong public policy case emerge for issuing a retail CBDC.”

Mr Jones said most arguments made internationally in support of a retail CBDC reflected issues that were of limited relevance to Australia, and it wasn’t obvious that a retail CBDC would best address them.

But unlike a retail CBDC that would be issued for use among the public, a wholesale CBDC would represent “more an evolution than revolution in our monetary arrangements”.

“It also recognises the stabilising role of central bank money in the settlement of wholesale market transactions, particularly in markets that are or could be systemically important – a point emphasised in international standards,” Mr Jones said.

RBA governor Michele Bullock. Picture: Max Mason-Hubers/NewsWire

The digital money work plan, dubbed Project Acacia, aims to work with industry on wholesale CBDC and tokenised commercial bank deposits to learn how new ledger arrangements and concepts like ‘programmability’ and ‘atomic settlement’ in tokenised markets could unlock benefits for the financial system and economy.

“We don’t have all the answers here, so look forward to engaging with industry partners who have an ability and appetite to innovate with the national interest in mind,” Mr Jones said.

But the RBA and Treasury are still assessing the merits of a retail CBDC and will release a follow-up paper in 2027 looking at community engagement, international experience and design options.

The view of the RBA and Treasury is that if a public policy case ever emerged in favour of issuing a retail CBDC, the Australian government would be the ultimate decision authority, and it would almost certainly require legislative change, in keeping with the international experience.

In the case of wholesale CBDC, the decision-making and legislative implications would depend on how transformative the new arrangements were, but in either case there would be close engagement between the RBA, Treasury and government.

Central bank digital currencies are currently being explored by 134 countries and currency unions, representing 98 per cent of the global economy, according to the Atlantic Council.

Currently, 66 countries are in the advanced phase of exploration — development, pilot, or launch.