RBA still unconvinced by a digital Aussie dollar

Australia’s central bank remains unconvinced of the need for a digital Aussie dollar, despite the continuing shift away from cash transactions.

In a research paper [pdf] last week, the Reserve Bank of Australia said there was still no “strong policy case to introduce a CBDC [central bank digital currency] for retail use” in Australia.

“The main conclusion is that the public policy case for issuing a general purpose CBDC in Australia is still to be made,” the paper states.

“Even though the use of cash for transactions is declining, cash is still widely available and accepted as a means of payment.”

The declaration comes almost three years after governor Philip Lowe first talked down the prospect of the RBA introducing a national digital currency in the near future.

“The case for doing this has not yet been established, but we are open to the idea,” he said just after Bitcoin reached record highs in late 2017.

The new research paper said the RBA’s “view on a retail CBDC remains very much in line with the working hypotheses outlined in 2017”.

With the launch of the New Payments Platform in 2018, the RBA said both households and businesses were now “well served by a modern, efficient and resilient payment system”.

“The NPP represents a major upgrade to the payments system, allowing real-time, data rich, easily addressed account-to-account payments that can be made on a 24/7 basis,” it said.

“Growth of transactions through the NPP has been strong compared with fast payment systems implemented in other countries.”

The RBA said that although the use of cash has been steadily declining for some decades, demand for banknotes had increased “significantly” during the pandemic.

“So concerns about the declining role of cash are less pressing than in some other countries, most notably Sweden, where a retail CBDC is being considered more actively,” it said.

The cost of designing, building and operating a CBDC is also a concern, especially given cyber security threats and rate of change with technology.

“The bank’s view is that there is currently no strong public policy case to introduce a CBDC for retail use,” the paper states.

Despite this, the RBA plans to “continue to consider the case for a CBDC”, including “how it might be designed” and other policy implications.

The bank is also researching the “technological and policy implications of a wholesale CBDC” through its in-house innovation lab, which has also previously explored the retail CBDC.

The innovation lab conducted a “limited proof-of-concept [PoC] of a DLT [distributed ledger technology]-based interbank payment system using a tokenised form of CBDC backed by ESA [exchange settlement account] balances” in 2019.

The RBA said it is currently working to extend this PoC to “incorporate tokenised financial assets to explore the implications of delivery-versus-payment settlement on a distributed-ledger platform as well as other programmability features”.