‘The Reserve Bank will be the last to the retail party’: Crypto experts react to the RBA’s CBDC development
As far as the wide, whacky world of digital currencies goes, the central bank variety is definitely the one wearing a button-up shirt, “slacks” and sensible shoes at the pool-party barbecue.
Still, the Reserve Bank of Australia seems to be getting right into the Central Bank Digital Currency (CBDC) concept… which we guess rests the pool barbie case.
This week the RBA confirmed its commitment to testing the viability of a CBDC Down Under, announcing a collaboration with the government-backed Digital Finance Cooperative Research Centre (DFCRC).
The two entities will be working together on a research project to explore use cases for, and potential economic benefits of, an Aussie CBDC.
And the Australian Treasury is also apparently placing a hand on that crowded wheel, too – “as a member of the steering committee for the project”, according to an RBA press release that likes using the words “stakeholders” and “strategic focus”.
“The project, which is expected to take about a year to complete, will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time and is intended to involve a pilot CBDC that is a real claim on the Reserve Bank,” the RBA noted.
“Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses.”
RBA deputy governor Michelle Bullock said the project was “an important step” on the way to an Aussie CBDC.
Australia joins a growing list of other countries exploring CBDCs at the pilot stage, including South Korea, India, Japan, South Africa, China, Singapore and Russia among others.
We already know some of the generalised Crypto Twitter feeling about CBDCs, and it goes something like this: “Ah man, it’s just Big Brother all over again – dangerously, invasively controlling everything… I tell ya, there’s barely any privacy any more… Just buy Bitcoin… and maybe some Ethereum, too… hey, I’m no maxi – not that there’s anything wrong with that…”
And we’re not saying those kind of right-on, decentralised-ethos points are without merit. That said, let’s see what a couple of bonafide industry experts are saying.
“We’re fully supportive of any developments, like CBDCs, that seek to remove intermediaries. A retail CBDC in the Australian market has the potential to reduce costs, improve efficiency and most importantly place financial decision making in the hands of private individuals.”
However, Miller also says…
“Whilst allowing a direct relationship between the RBA and private individuals/enterprises would give rise to many efficiency gains, it is still very different from the promise that cryptocurrencies are delivering.
“Cryptocurrencies are open-source and fully composable/programmable – features that are critical to creating the conditions for greenfield innovation and not another walled garden.
“It’s inevitable that in the long run Australia’s financial infrastructure will use open-source, crypto-based systems. The benefits of crypto infrastructure as opposed to traditional legacy-stack systems has already been recognised by international counterparts.”
“We’re not surprised to see the Reserve Bank beginning its experiments with CBDCs,” Ryan told us. “With both NAB and ANZ well advanced with their own stablecoin projects, it’s clear that an institutional (if not exactly retail) demand already exists for a fully digital, on-chain settlement layer.
“From international transactions to crypto-asset on/off-ramps and emerging carbon credit markets, the use case for this kind of institutionally focused coin is well-established.
“However, don’t expect to see a CBDC designed for everyday use at any point in the near future – a major bank will definitely get there first.”
Stockhead: Interesting take. Big Aussie banks were certainly showing plenty of crypto interest late last year when things were going well…
“Yeah, the ones I mentioned have a chance of bringing a stablecoin to market for the next cycle… if perhaps still a bit unlikely. In fact, I wouldn’t be surprised if an exchange gets there first instead.
“Generally, though, what I’m getting at is, I think the Reserve Bank will be the last to the retail party.”